Does Biden Welcome Their Hatred?

This week, Joe Biden gave a populist State of the Union. And the administration reduced the price of inhalers and slashed credit card late fees. But Biden also cut his own Antitrust Division's budget.

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This week was the State of the Union speech, which sounded like a re-election speech from President Joe Biden. Last year at the same time, Biden rejected the consolidation-friendly policy agenda of Bill Clinton and Barack Obama, and this one was similar (though framed far more around Cold War-ish policy). He mentioned junk fees, credit card predation, making stuff in America, and antitrust. “For millions of renters,” he said in alluding to the RealPage suit, “we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents.” But there was also a moment in which the written text said “Wall Street didn’t build this country,” and Biden ad libbed some weird praise. “They’re not bad guys,” he added about Wall Street bankers, “but they didn’t build it though.”

And that desire to caveat, in many ways, goes to the heart of the Biden administration’s fascinating and not-always-coherent approach to financial concentration. Biden, and most Democratic leaders, sometimes reach back to Franklin Delano Roosevelt’s 1936 reelection speech, when FDR proved he was on the side of the people by showing who was against his agenda. The “old enemies of peace - business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering,” he argued, “are unanimous in their hate for me--and I welcome their hatred.”

Roosevelt had his dalliances with powerful bankers, but his agenda was to build a system where ordinary people and the wealthy had equal rights. And this objective was deeply offensive, to Wall Street. As G.K. Chesterton once noted, “The poor have sometimes objected to being governed badly; the rich have always objected to being governed at all.”

And today that aphorism is still true. Now, as surprising as most people find it, there are a LOT of powerful industries who are mad at Biden, and you can see that in just who is suing his administration. There’s Meta, for instance, which is suing because the government is trying to stop the firm from spying on and targeting children with ads. But that’s not all. Pharma firms Johnson & Johnson, Merck, and Bristol Myers Squibb are litigating over a law that allows Medicare to negotiate directly with drug companies over their costliest medications, Amazon and a bunch of other corporations are arguing the government’s board that upholds working conditions is unconstitutional, auto dealers filed a petition to block a rule saying they can’t lie to customers about fees and charges, and there are lawsuits from railroads, vaping firms, Wall Street, sleazy nursing homes, hospitals, construction contractors, and even Silicon Valley Bank.

The anger isn’t just over his policies, but over the sentiment that this wasn’t the Biden they expected. Biden’s Senate career, superficially, seemed to be all about helping credit companies and banks, and voting for deregulation and free trade. If you turn on CNBC any morning, you’ll hear them complain about how Biden as President is acting like Elizabeth Warren or Bernie Sanders. It’s not true, but it does speak to something real. In the Senate, Biden saw himself as working for Delaware, and the credit card industry mattered to his state. He’s now the President, and that’s a different job. He was never, in other words, ideological about commerce, he just wanted to seem like he was with the savvy political faction that had broad appeal and sought a reasonably fair deal for ordinary people. In the 1980s and 1990s that was neoliberals, today it’s not.

And that’s why he sounds like a semi-populist in his national addresses, albeit one who ad-libbed some nice words for Wall Street. But more important than the rhetoric of the State of the Union is whether the administration is actually taking on corporate power. Because it’s in the guts of policy-making, the thousands of decisions by individuals whose ultimate patron is Biden, where we can see the direction of the White House. And here, going through the events of the week reveals a mixed picture that I think is a good characterization of the Biden administration in miniature, both the positive and negative.

We’ll star with Monday, when top White House officials, as well as the Governor of Kentucky and FTC Chair Lina Khan, held a listening session on pharmacy benefit managers, the middlemen who inflate the prices of medicine through bribery (and are themselves owned by giant conglomerates like UnitedHealth Group and CVS). Mark Cuban was there, as were pharmacists and business leaders, and they told senior White House leaders all about the scam. PBMs were extremely mad, because the event indicated a genuine commitment to reform. That said, it was notable that Domestic Policy Council Director Neera Tanden and HHS Secretary Xavier Becerra did not seem to know what PBMs are, and kept talking about being able to negotiate drug prices. Drug price negotiation isn’t bad, but it suggested a lack of curiosity among top policymakers. So that was Monday.

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On Tuesday, bank regulator Rohit Chopra closed a loophole allowing banks to profit from credit card late fees, which means that late fees will soon be capped at cost, or $8, down from an average of $32. The same day, the White House also announced a ‘strike force’ to focus on monopolies in health care.

On Wednesday, FTC Chair Lina Khan noted that one of the world’s largest pharmaceutical firms, Boehringer Ingelheim, is cutting the “out-of-pocket costs of its asthma and COPD inhaler products down from hundreds of dollars to $35,” in response to the FTC’s litigation around patent fraud from late last year, as well as public pressure from Senator Bernie Sanders. Then the big banks, working through the U.S. Chamber of Commerce, sued the administration, in an attempt to block the rule cracking down on excessively high credit card late fees.

But then came the bad stuff. On Thursday, Biden Federal Reserve Chair Jay Powell announced that he is going to help Wall Street by refusing to move forward with rules forcing Wall Street banks to stop gambling so much with other people’s money. This was a huge fight among bank regulators, and Powell decided that he didn’t like to hear banks complain, so he backed down.

On Friday, the Senate passed a government funding bill that cuts the Antitrust Division by 20% and rolls back some of the antitrust strengthening from 2022, a result of negotiations between the White House, Democratic Senator Jeanne Shaheen, and House Republicans. The White House communications shop misled people about the funding change, probably because they didn’t realize what had happened. Last Sunday, I broke the story about the funding cuts, the Prospect and the Lever found a nest of corruption around it, and there was anger from anti-monopoly groups. It was a bad situation, but the backlash did prompt Senator Shaheen to publicly promise Senator Amy Klobuchar she’d work to restore the money next year.

So there we go. A bunch of steps forward, some steps back. And on balance, more than any political leader in my lifetime, Biden has turned some parts of government - antitrust enforcers and bank regulators - to attack concentrated economic power. He became the first President to walk a picket line when he joined the successful auto worker strike. His enforcers have initiated antitrust suits and investigations against Google, Meta, Amazon, Ticketmaster, UnitedHealth Group, private equity backed anesthesiologists, large seed and chemical producers, meatpackers, giant landlords, and realtors. I don’t write much about consumer protection and privacy, but there have been a whole series of ground-breaking orders - including a key court decision in February in the Kochava case - that are restructuring how data brokers operate. Meanwhile, the Securities and Exchange Commission is trying to implement new rules on private equity, and litigating around crypto.

It’s not just law enforcement, the administration unlocked funding for semiconductor production, battery on-shoring, and a domestic renewable energy industry; we haven’t seen such investment in factories in decades. The rate of people without health insurance has also declined under Biden, to a record low of 7.7%, again, largely because of changes in law. Even on simple stuff, like the recent Boeing fiasco, the administration is taking a reasonable approach.

All that said, there are steps back. There’s also obvious corruption; a long-time Biden aide, Olivia Dalton, just announced she’s leaving her position in the White House to work for Apple. Biden’s chief of staff Jeff Zients is a management consultant whose only skill is being endlessly polite. And Lisa Monaco, the number two at the Department of Justice and a former Apple lawyer, has actively tried to kneecap merger policy, and in the funding fight, got her personal DOJ slush fund increased.

And despite the furious activity of competition policy enforcers, there are too many parts of the Biden administration that simply do not govern. As I noted above, officials like Neera Tandem (and before her Susan Rice), believed that consolidation and price discrimination bring down prices in health care, and seem afraid of offending powerful corporations that they think are good corporate citizens. Biden has appointed judges, such as Ana Reyes and Jacqueline Corley, who are hostile to antitrust enforcement for the same reason. Last year, Biden Solicitor General Elizabeth Prelogar tried to pull down a First Amendment shield for Google at the Supreme Court.

One result of this incoherence is that administration isn’t yet bending down corporate profit margins in a noticeable way. The White House economics team pretty much sabotaged attempts to use antitrust against inflation-related price hikes. Meanwhile, Treasury Secretary Janet Yellen, National Security Advisor Jake Sullivan, Commerce Secretary Gina Raimondo, Fed Chair Jay Powell, and State Department chief Tony Blinken are all aggressive boosters of big tech and big pharma, as well as corporatized forms of trade. Energy Secretary Jennifer Granholm wouldn’t even join the White House Competition Council, and the Federal Energy Regulatory Commission is getting ready to roll back competition among transmission lines, which will boost electric utility prices.

There is also broad lethargy and weakness across the government, even where there is interest. The Department of Agriculture has done almost nothing to address consolidation in agriculture, with Secretary Tom Vilsack at one point saying the government won’t stop buying meat from scandal-riven beef titan JBS because the government needs the beef, and even allowing one of his economists to sabotage a Biden antitrust suit against a sugar merger.

In health care, the White House put out a supply chain report in 2021 encouraging HHS to do something about the monopolies known as Group Purchasing Organizations behind medical shortages by looking at the exclusive contracts in hospital buying. Yet Secretary Becerra did nothing for years, probably because staff saw the monopolists as the good guys, and the shortages are now at an all-time high. Last month, the FTC and HHS finally launched an investigation into GPOs. Good. But far too late to have an impact this term.

And even with obvious crises, often it’s too difficult to move meaningful policy. The American baby formula industry, for instance, is right now being offshored, because no one in the Biden team or in Congress is focused on reforming the program that fostered the monopoly power behind the shortage. Instead, Congress and the administration cut tariffs and did nothing else, which means that we’ll be wholly reliant on foreign supply in a few years. It’s easier to bring in stuff from Europe than to fix our own systems, and that’s what the fancy writers at The Atlantic who peddle ‘the abundance agenda’ told policymakers to do.

Finally, politics matters. It’s not clear anyone knows that Biden policy has been impactful, because the Biden communications team is generally focused on questions of bureaucratized identity and not economic liberty. If the goal is to restore faith in democracy, then you have to actually explain how you are using government levers to improve their lives, and be honest about where you’re falling short.

All that being said, it’s now a political moment. And Biden’s opponent, Donald Trump, has a track record that the political media often obscures for the same reason they tend not to talk about Biden competition policy. Some of Trump’s policy choices in his first term, such as the tariffs and Operation Warp Speed, were excellent. He launched antitrust suits against Google and Facebook, put out a useful order on pharmacy benefit managers, forced hospital price transparency, and blocked Amazon from getting a key cloud computing contract with the Pentagon. Whether Trump engaged in these acts intentionally or not, the conservative movement imported anti-monopoly elements into its framework, and he allowed them to move forward. (I don’t want to overstate the tendency, Trump largely allowed big mergers, like Disney-Fox, CVS-Aetna, Google-Fitbit, and Amazon-Whole Foods, and his Antitrust Division encouraged private equity takeovers. But on policy Trump wasn’t always pro-concentration.)

That said, a story this week reminded me why it’s extremely hard to trust an administration that he runs. And this story isn’t political. In 2020, Trump issued an executive order forcing TikTok to divest itself of Chinese ownership, based on national security concerns. That EO was struck down in court because of a lack of legal authority. This week, a Congressional committee passed a bill to actually do what Trump originally sought, and Biden said he’d sign it if it passes the full Congress. But Trump, surprisingly, came out vehemently against the TikTok bill, saying that would only help Mark Zuckerberg, the ‘true enemy of the people.’ It turns out Trump had just met with a billionaire owner of a chunk of TikTok, China-linked conservative Jeff Yass, and pronounced himself ‘back in love’ with Yass’s political group, the Club for Growth, and the financial support that comes with it. (Yass also just gave up to $10 million to Ted Cruz, who runs the relevant Senate Committee on the Republican side of the aisle that has jurisdiction over the bill.)

I don’t care what your position is on divesting or banning TikTok, the prospective President taking what looks like an obvious bribe from a China-linked billionaire is problematic. And the obviousness reminded me of some of the random routine scary things that happened from a governance standpoint that I had forgotten. For example, in 2019, Trump refused to ground the Boeing 737 Max after all other nations had done so because he had talked to Boeing’s CEO. I was terrified to fly after the President ignored obvious airline safety crises even after two 737 Max planes had crashed. It also made me worried about all the other random small but meaningful policy decisions that I wasn’t paying attention to. (The administration then gave Boeing a get-out-of-jail free card.) Another one is when Trump’s Justice Department in 2020 signed a favorable settlement with the opioid kingpin Sackler family that let them pay a minor fine and avoid criminal penalties. I haven’t thought about Trump as President for awhile, but the TikTok reversal reminded me what it was like when he was in charge.

All that said, whoever wins in 2024, there are reasons for optimism. The energy in the Biden administration is on the side of the anti-monopolists. There is a hardy group on the right centered among younger conservatives fighting the GOP establishment for whom that dynamic is similar. Moreover, outside the Federal government, state attorneys general are now used to being aggressive on antitrust, and there’s a lot more litigation from private plaintiffs, including conservative ones.

Ultimately, we’ve re-injected the anti-monopoly philosophy into America, and there’s no going back. My favorite example is a story about a company called Perimeter Solutions, which makes aerial fire retardants for forest fires, and overcharged everyone because it was a monopoly. In 2023, the Forest Service started buying from Fortress Fire Retardant, which makes a more natural, safer, and cheaper product that competes with Perimeter’s. Why? The Forest Service cited Biden’s executive order on competition. “Having two fire retardant sources not only increases completion in the sector, but also increases the stability of supplies to ensure the nation can respond to wildfires appropriately,” it said. No one told the official who made this decision to do it, he or she just thought the Executive Order was a good idea.

And that’s how you know you’re onto something. America takes a long time to turn around. But the turn is real.

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cheers,

Matt Stoller