April 23, 2021

We find it interesting that Bidenomics assumes that tax rates have no significant impact on output, yet it is devoting a great deal of resources to reduce factor mobility across states as well as national borders. Simply put, Bidenomics is spending a great deal of time and effort attempting to stamp out the substitution effects, and thereby eliminate or at the very least reduce the economy’s aggregate elasticities responses. There is an easy explanation for all this. Bidenomics assumes that it has the necessary tools to prevent the substitution effects and if it succeeds, a big if, the tax rates increase will have no significant impact on output. Under this scenario Bidenomics will be able to do two things: One is to completely regulate the US economy and thus control the composition of output as well as the distribution of income. The outcome is that by controlling the economy, the administration will be able to raise the revenues it needs order to implement the transformation of the US economy promised under the Build Back Better platform.

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