OPINION
EZRA KLEIN
Biden Has the Right Idea, but the Wrong Words
March 2,
2022, 12:52 a.m. ET
Ezra Klein
By Ezra
Klein
Opinion
Columnist
https://www.nytimes.com/2022/03/02/opinion/biden-state-of-the-union.html
President
Biden’s State of the Union address on Tuesday night sounded like two speeches
grafted together.
First came
a stirring paean to the bravery of the Ukrainian resistance and a vow to ravage
Russia’s economy in a bid to turn back Vladimir Putin’s tanks. Biden forswore
sending troops to fight alongside Ukrainians, but he promised to wage financial
war on their behalf, cutting Russia off from its foreign reserves, its
oligarchs off from their yachts and villas, and its economy off from the
financial flows and technological trades needed for continued growth.
“Throughout
our history, we’ve learned this lesson,” Biden said. “When dictators do not pay
a price for their aggression, they cause more chaos.”
Then came
the more traditional speech, the one Biden would have given if the State of the
Union had come a month ago. He bragged about the economic growth, job creation,
infrastructure investment and wage gains seen on his watch. He admitted that
inflation was undermining America’s economic boom, but said that he had a plan.
“One way to
fight inflation is to drive down wages and make Americans poorer,” Biden said.
“I have a better plan to fight inflation. Lower your costs, not your wages.
Make more cars and semiconductors in America. More infrastructure and innovation
in America. More goods moving faster and cheaper in America. More jobs where
you can earn a good living in America. And instead of relying on foreign supply
chains, let’s make it in America.”
That these
speeches felt so tonally separate was a rhetorical choice, not a reflection of
reality. Because they are circling the same problems — and the same solutions.
Let’s start
with the problems. The West’s sanctions on Russia are punishing precisely
because Russia is intertwined with Western economies. That’s particularly true
in energy and agriculture, where Russia is a major exporter. The sanctions, as
proposed, are ferocious in cutting Russia off from global financial markets,
but they exempt energy and agricultural goods. That’s a big loophole. “If we’re
not interrupting the payment for energy deliveries, we are not hitting the bit
of the Russian economy which generates the juice, which sustains Putin’s
regime,” Adam Tooze, director of the European Institute at Columbia University,
told me.
Those
exemptions exist because the United States and Europe fear the pain that
cutting off Russia’s core exports would cause their economies. That’s exactly
what Putin is banking on, and what mutes the West’s leverage over him. But the
images of Russia’s invasion, and the heroism of the Ukrainian people, is
hardening the West’s resolve and quickly.
The
sanctions imposed on Friday were a pale shadow of what the West did on Monday,
when it took aim at Russia’s central bank and its fortress of foreign currency
reserves. Putin’s hope for a lightning invasion, with only token resistance,
has crumbled, and Russia appears to be preparing for a far more brutal
campaign. Pressure will build on Biden and the Europeans to choke off Russia’s
energy exports. Both the sanctions we’ve seen and the sanctions that may come
will be felt, in America and Europe and elsewhere, as inflation.
Biden
signaled all this, if a little obliquely. “To all Americans, I will be honest
with you, as I’ve always promised,” he said. “A Russian dictator, invading a
foreign country, has costs around the world. I’m taking robust action to make
sure the pain of our sanctions is targeted at Russia’s economy. And I will use
every tool at our disposal to protect American businesses and consumers.” Every
tool will not be enough if Biden is as committed to stopping Putin as he says.
I don’t
want to suggest there’s symmetry here. The pain the United States and Europe
can inflict on the Russian economy dwarfs any feedback effects. Measured in
G.D.P., Russia has a smaller economy than Italy, and it is one-fourteenth the
size of that of the United States. But the exemptions tell the story. For all
Biden’s resolve on Tuesday night, he did not try to prepare Americans to
sacrifice on behalf of Ukrainians in the coming months, if only by paying
higher prices at the pump. Instead, he said, “my top priority is getting prices
under control.” That’s the tension Putin is exploiting.
At the same
time, it adds force to the agenda Biden laid out in the rest of his speech.
“Economists call it ‘increasing the productive capacity of our economy,’” Biden
said. “I call it building a better America.”
There are
parts of Biden’s agenda that, if passed, could help to lower prices for
families, rapidly. Medicare could negotiate drug prices next year. Child care
subsidies could take effect quickly. There is no resource limitation stopping
us from lowering Obamacare premiums. The same cannot be said for Biden’s more
ambitious proposals to build the productive might and critical supply chains of
the United States. To decarbonize the economy and rebuild American
manufacturing and lead again in semiconductor production is the work of years,
perhaps decades. It won’t change prices much in 2022 and 2023.
But it
needs to be done, and not just because of Russia. Covid was another lesson, as
America was caught without crucial supply chains for masks and protective
equipment in the beginning of the pandemic, and without enough computer chips
as the virus raged on. And while I don’t like idly speculating about conflict
with China, part of avoiding such a conflict is making sure its costs are clear
and our deterrence is credible. As of now, whether we have the will to defend
Taiwan militarily is almost secondary to whether we have the capability to
sever ourselves from Chinese supply chains in the event of a violent dispute.
Biden
devoted a large chunk of his speech to his Buy American proposals, which
economists largely hate, but which voters largely love. As a matter of trade
theory, I’m sympathetic to the economists, but as Russia is proving, there’s
more to life than trade. You could see that in an analysis done by The
Economist, which has long been one of the loudest voices arguing for the logic
of globalization. “The invasion of Ukraine might not cause a global economic
crisis today but it will change how the world economy operates for decades to
come,” it wrote. Russia will become more reliant on China. China will try to
become more economically self-sufficient. The West is going to think harder
about depending on autocracies for crucial goods and resources.
This was,
in the end, the unfulfilled promise of Biden’s speech. Russia’s invasion and
America’s economy were merely neighbors in the address, but no such borders
exist. And connecting them, explicitly, would bring more coherence and force to
Biden’s agenda.
Energy, for
instance, is central to Russia’s wealth, power and financial reserves. Biden
could have used that to mount a full argument for his climate and energy
package, which is languishing in the wreckage of Build Back Better. As the
energy analyst Ramez Naam has noted, Biden’s package would reduce American
demand for oil and natural gas, both of which would weaken Russia — and plenty
of other petrostates we’d prefer that neither we nor our allies were dependent
on.
Helpfully
for Biden, Joe Manchin seems not just open to this line of argument — he’s
leading on it. “The brutal war that Vladimir Putin has inflicted on the
sovereign democratic nation of Ukraine demands a fundamental rethinking of
American national security and our national and international energy policy,”
the senator said in a statement on Tuesday.:
The United
States, our European allies and the rest of the world cannot be held hostage by
the acts of one man. It is simply inexplicable that we and other Western
nations continue to spend billions of dollars on energy from Russia. This
funding directly supports Putin’s ability to stay in power and execute a war on
the people of Ukraine.
Manchin
went on to say that “we must commit to once again achieving complete energy
independence by embracing an all-of-the-above energy policy to ensure that the
American people have reliable, dependable and affordable power without
disregarding our climate responsibilities.” I do not claim to know what Manchin
truly has in mind here, nor what he will vote for when the roll is called. But
it is a door ajar, and Biden should step through it.
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