In one of the few memorable lines from Tuesday’s State of the Union address, President Joe Biden declared that competition is essential to a properly functioning economy.
“Capitalism without competition is not capitalism,” the president declared. “It’s exploitation.”
A bit of a cliché, but State of the Union speeches tend to be filled with them. What made the line particularly disturbing, however, was that it was delivered just 10 minutes or so after Biden praised — to bipartisan applause — the federal government’s toughening of so-called Buy American rules to protect American companies from foreign competition. use of power Infrastructure projects. Doing so, he argued, would not only strengthen the economy but was patriotic and noble.
But the tension between these two moments isn’t the result of poor speechwriting or a temporary lack of clarity from the president. This is actually an excellent illustration of a fundamental contradiction that has affected the economic policy of the Biden administration for the past two years. Even as the White House and its Democratic allies in Congress push to ban antitrust deals and bring antitrust lawsuits against Google and Amazon, they are raising protectionism for American makers of everything from drywall to advanced computer chips.
Is competition essential to capitalism? Of course. But the Biden administration’s approach seems to depend on who’s running.
When companies force employees to sign non-compete agreements, that’s bad. In July 2021, Biden directed the Federal Trade Commission to “find ways to reduce the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” With federal action expected in the near future, Biden drove the point home in his speech Tuesday, promising that banning non-competes would mean “companies have to compete for workers.”
In the same speech, Biden urged Congress to pass the Protecting the Right to Organize (PRO) Act, which would effectively ban workers in many occupations from becoming independent contractors. Increased competition for labor mobility and labor is good! Except when they don’t, apparently.
Once you start looking for it, this contradiction seems to pop up in almost every major policy pursued by the Biden administration.
Take, for example, the Inflation Reduction Act, which Biden on Tuesday night claimed was the “most important investment to address the climate crisis.”
A key component of the law is a 30 percent tax credit to offset the cost of installing solar panels on the rooftops of American homes and businesses. This is a policy clearly intended to encourage economic activity and competition in the rooftop solar market. But at the same time, the Biden administration has raised Trump-era tariffs on imported solar panels and their components, driving up the price of those products. According to the Biden administration, these imported products are somehow a national security concern, but it’s clear that the tariffs are really a way to protect American manufacturers from unwanted competition.
Similarly, the 2021 infrastructure bill pours massive federal subsidies into expanding broadband networks—but requires the money to be funneled only to companies that build fiber-optic networks, not those that provide wireless Internet connections.
Because competition is bad. Except when it’s good, like the meat and poultry supply chain, which the Biden administration has slammed with federal subsidies because “a lack of competition hurts consumers, producers and our economy.”
We need more competition, if that competition is not too competitive. What if an airline tries to compete by lowering ticket prices but differentiates by charging customers extra fees to choose where they want to sit? Government intervention is needed for this. “Baggage fees are bad enough,” Biden said Tuesday, as he vowed to ban the practice. “Airlines cannot use your child as a piece of luggage.”
Consumers can’t be trusted to sort through different pricing options to decide what’s best for their needs, but it’s also unfair to businesses. very good Anticipating the wishes of their customers. A major argument behind Democratic efforts to use antitrust laws against Amazon and other big tech companies is that those companies promote certain products or services at the expense of other comparable items. You know, like in grocery stores when they put a certain product on display at the end of an aisle. But different, somehow, because it’s happening online.
Biden’s Justice Department, meanwhile, is pursuing an antitrust lawsuit against Google over its supposed dominance of online advertising—even as the company’s share of online ad revenue is declining. Thanks, yes, competition.
All other examples aside, the best illustration of this contradiction is Biden’s “Buy American” rule for federal infrastructure jobs. “When we do these projects, we’re going to buy American,” Biden said Tuesday, “requiring new standards to require all construction materials used in federal infrastructure projects to be made in America. American-made lumber, glass, drywall, fiber optic cable.”
There is no denying that the Buy American rule increases the cost of construction projects. The specific political advantages and economic disadvantages of these rules may be interesting, but are somewhat beside the point here. What is important is that the Buy American law is fundamentally anti-competitive. In the government procurement market, Biden says, less competition is desirable. There’s nothing wrong with Canadian-made drywall, but we’re going to leave it out of consideration anyway.
“Bullg Import competition for its wide range collection Funded by federal grants There are also possibilities To increase its market power Domestic producers in Industries that are already highly concentrated, probably leading to higher project costs,” the Congressional Research Service concluded in a 2021 report examining the details of Biden’s infrastructure legislation.
Increasing the market power of already concentrated industry leaders? In a slightly different context, Biden or Sens. Amy Klobuchar (D-Minn.) or Elizabeth Warren (D-Mass.) may be interested. Instead, Biden received bipartisan applause for promising to limit competition.
The frustrating thing about all of this is that Biden is not wrong when he says that competition is essential to capitalism. And what’s really disappointing is that his policies are helping to create rather than prevent the “exploitation” that he says will result in less competition in the marketplace. In this case, it’s exploitation of taxpayers, who get less than they would otherwise get from government-built infrastructure.
Biden is right: Competition is essential. Now, he should apply that logic more consistently.