Biden’s Leviathan: The Industrial State and Its Discontents

American capital knows how to read a room. This January, ensconced in the Capitol rotunda, America’s business elite gathered to pay homage to a man they had deemed radioactive just four years earlier. Even among those at the pinnacles of American wealth and power, to be seated in the rotunda was a special privilege—and one not enjoyed by the CEO of OpenAI, several Republican governors, most members of Congress, New York City Mayor Eric Adams, and various cryptocurrency impresarios. (This group was relegated to the Capitol’s visitor center, where it watched a live feed of the proceedings from a makeshift overflow room.) A similar fate befell many would-be attendees of the presidential transition’s inaugural balls, who, having donated a record-breaking $170 million to the inaugural committee, were told that the events had run out of seats altogether.

The vectors of corporate power have shifted unmistakably right. In one sense, this is nothing new. Trump’s first inauguration also broke the then-standing fundraising record—to say nothing of the policy shifts within these firms, as well as Mark Zuckerberg’s personal restyling. But Meta, which had barely acknowledged Trump’s first inauguration, gave $1 million to his second. The same holds for Alphabet, Amazon, Tesla, and SpaceX, each donating little to nothing to the first and around $1 million to the second. Whether it amounts to a meaningful realignment or a temporary “vibe shift,” American business partisanship has entered territory uncharted in recent history.

The irony of the Democratic denouncements of the Trump-aligned “broligarchy” is that, four years ago, this constellation of business interests had been the cornerstone of Biden’s own coalition. It was not lost on many particularly on the right, that a party whose president had awarded his Presidential Medals of Freedom to mega-donors George Soros and Anna Wintour was now denouncing the billionaire class. Attempting to negotiate this contradiction, Ken Martin, the newly elected chair of the Democratic Party, declared that the party only took contributions from “good billionaires.” The corollary of Martin’s reasoning is that the American capitalist class’s new alignment is a matter of genuine belief in the MAGA cause: they are “bad billionaires,” whose radicalization transcends the abstract logic of capitalism. The “broligarch” slur itself, embraced by Senator Amy Klobuchar, betrays a belief that the Zuckerberg-Musk-Bezos alignment stems from their shared toxic masculinity.

This explanation—undoubtedly comfortable to Democratic elites, who wish to both critique the Republican-aligned oligarchy and maintain warm relations with the capitalist class at large—misses the mark. Business interests are fluid, and their allegiances follow power more reliably than principle. Until the very eve of the election, business remained far more aligned with the Democratic Party than it now cares to admit. Capital’s late defection, then, offers hints as to what the next four years might hold. While Republicans now command an otherwise fractious business coalition united mainly in opposition to regulation, Democrats maintain their recent, if improbable, role as the party of American capitalism’s continued functioning—a position which will prove limiting in the years to come.

Bringing the State Back

The exact political configuration achieved by the Biden administration was something of a white whale during the first Trump term. Ironically, even as the Trump administration took aggressive steps to protect and privilege American semiconductor firms, the industry largely clung to the neoconservative vision of U.S. dominance through labor arbitrage and the international prerogative of capital. John Neuffer, president of the sector’s business advocacy group, the Semiconductor Industry Association (SIA), had served in the Office of the United States Trade Representative during the George W. Bush years; during Bush’s presidency, the president’s younger brother, Neil Bush, took work advising a Chinese semiconductor firm (of which he remains a partner today).

The tech sector had good reason to favor internationalism: Generally speaking, the U.S. semiconductor industry does not manufacture its own chips. Nvidia, Qualcomm, e tutti quanti are exclusively chip design firms, with manufacturing outsourced to foreign foundries, chief of which is Taiwan Semiconductor Manufacturing Corporation (TSMC). The SIA, for its part, opposed nearly every plank of the Trump administration’s trade policy, complaining of how “isolation from the global value chain could severely and negatively affect its downstream producers of finished products using semiconductors.” Ironically, the Trump administration’s attempts to promote American firms in this sector appeared to have had the opposite effect: the SIA even opposed the Trump administration’s offensive against intellectual property theft, demanding that it loosen export controls against Huawei.¹

As the historian Andrew Yamakawa Elrod observes, the pandemic and the resulting shortages scrambled traditional alliances between business and government power. In August 2020, Secretary of State Mike Pompeo announced that, as part of the “Clean Network” program, the United States would take steps to exclude Chinese mobile phones and network carriers from U.S. telecommunications networks. For its part, the State Department announced its intent to rid itself of all equipment provided by Chinese (and other “untrusted”) vendors. That summer’s omnibus defense bill included authorization for “Semiconductor Manufacturing Incentives,” though it did not appropriate any new funds for this purpose. At once, business organized in new configurations. In July, Google’s Eric Schmidt convened a “China Strategy Group” of management consultants, investment bankers, venture capitalists, and former Bush staffers to produce political pressure for a strategy at the nexus of high technology and national security. By September, they had published their recommendations. Foremost among them was a $50 billion subsidy program for domestic semiconductor foundries.²

By late 2020, the tech sector’s internationalist posture had given way to economic nationalism. The trouble was that a Republican administration, particularly under Trump, could not be trusted with its execution. It would require a new and dramatically deficit-increasing fiscal policy. The newly formed political constituency for the techno-security manufacturing agenda needed to summon a sympathetic administration.

During the 2020 election, the electronics manufacturing sector mobilized with unprecedented scale and unity in favor of the Democratic Party. In 2016, the sector had spent around $60 million on campaign contributions, roughly split between both parties. In 2020—following a historic flood of dark money to the Democrats—it donated $104 million to Democratic campaigns and $34 million to Republicans. This massive fundraising advantage persisted across most sectors: The Biden campaign enjoyed a commanding fundraising advantage, raising $1.6 billion to Trump’s $1 billion. Just 14 percent of American billionaires gave to Trump, while about a quarter gave to Biden. Combined, Democratic candidates raised nearly twice the sum of “dark money” given to Republicans—culminating in the Democrats outspending their opponents by nearly $3 billion.³

The Center for a New American Security (CNAS), a Democratic-aligned think tank populated by Obama administration veterans, functioned as a central coordinating node for this effort. The Biden campaign’s foreign policy team and Schmidt’s China Strategy Group both fell under the substantial influence of CNAS. The day after the Biden transition opened shop, CNAS listed the SIA as among its public donors. The semiconductor industry’s investment in Democratic defense-industrial planning would soon pay dividends. The next week, two individuals listing CNAS as their most recent employer were named to Biden’s Department of Defense. In early January, CNAS CEO Victoria Nuland emerged as Biden’s nominee for under secretary of state for political affairs, the third most powerful position in the State Department. By January 21, eleven CNAS alumni, including two board members, had been selected for senior leadership positions within the Biden administration.⁴

The blueprint that emerged for the Biden administration was an Obama-esque technocratic experiment in reworking fiscal policy to fit the techno-industrial national security agenda. Insofar as class politics were concerned, the diktat of Democratic policy planning was, as Biden assured donors in June, that “nothing will fundamentally change.” But 2020’s convergent crises—the pandemic and the ensuing economic collapse, the summer protest wave, and the looming presidential election—transformed its scope and nature.

What Biden owed the protest movement for his victory was unclear (he had vehemently disavowed demands for police defunding and abolition), though it was clear he owed something. And whereas Hillary Clinton and the Democratic establishment refused to engage Bernie Sanders during the 2016 campaign, the Sanders movement in 2020, alongside Elizabeth Warren, represented a far more significant force, enough for the Biden team to feel the need to seek its input on policy. An informal power-sharing agreement between the Sanders-Warren wing of the party and the Biden establishment ensued. Warren and Sanders secured an early victory with neo-Brandeisian scholar Lina Khan’s appointment as FTC chair, while Warren separately pressed for renewed vigor at the Consumer Financial Protection Bureau.

The challenge for the Biden team was to synchronize the two flanks of their coalition. The techno-security manufacturing agenda would be a priority for the incoming administration, whose staffing reflected its definite obligations toward its partners in tech and venture capital. When announced in March, the American Families Plan—a predecessor to the “Build Back Better” (BBB) plan—offered $230 billion in subsidies for semiconductor manufacturing and R&D. The catch: these investments would be funded by a Warren-inspired wealth tax and linked to historic reforms in child care, elder care, and education.

Would corporate America accept this grand bargain? In the face of razor-thin congressional margins, this proved the defining question of the early Biden years.

From the Bottom Up?

By winter 2021, an answer had become apparent: BBB’s New Deal–style programs were dead. A wide coalition of interests united against the bill: low-wage industries—distribution, retail, leisure, and hospitality—feared that child support and family leave would drive up labor costs; multinationals and Wall Street balked at higher corporate taxes; and Democratic Senators Manchin and Sinema opposed expanded social benefits. Hoping to salvage investments in infrastructure, green energy, and, of course, semiconductors from the wreckage, the Biden administration retreated to what would become its three signature industrial bills: the CHIPS Act, the Inflation Reduction Act (IRA), and the Bipartisan Infrastructure Law. The path to passing the former ran, quite literally, through Taiwan: Nancy Pelosi’s August 2022 visit, unprecedented for a high-ranking American official since the 1990s, provoked Chinese military exercises over the strait, suddenly making the semiconductor industry’s geopolitical vulnerability too urgent for Republicans to ignore.

The resulting compromise would shape the final two years of the Biden presidency. No longer would the Bidenites seek a historic expansion of the welfare state. Instead, the administration’s three major industrial bills tethered generous business tax credits, grants, and low-cost lending (funded mainly through deficit spending) to a sort of social provision mediated through the private sector. The CHIPS Act, for instance, required firms awarded sums exceeding $150 million to meet an explicit and unique labor standard requirement for the provision of child care. Likewise, to claim the full tax credit established under the IRA, employers must meet prevailing wage and apprenticeship requirements, alongside domestic content requirements intended to generate a chain reaction across American manufacturing.

As novel as these initiatives seemed, historian Brent Cebul explains that they follow a long tradition in Democratic political economy: that of “market-making.” The Obama administration, for instance, foreclosed the prospect of a genuinely public option for health insurance in favor of a series of carrots and sticks for the private sector. Rather than impose a direct relationship between citizen and state, the Obama administration (backed by the assumptions of behavioral economics) sought to “nudge” corporate America toward expanding access to insurance markets. Much like Obamacare, the Biden administration’s three industrial policy bills do not directly reach Americans: they operate by shaping markets, usually invisibly.⁵

Even so, any honest analysis of the Biden years must acknowledge that the Biden era has ushered in a new paradigm for fiscal policy. In the wake of the Great Recession, Democratic éminence grise John Podesta suggested that cuts to Social Security “could starkly demonstrate to skeptical debt markets that the United States is willing to take on a politically difficult fiscal issue”—a program also supported by the former Federal Reserve chair and monetarist ideologue Paul Volcker, then an Obama adviser. In an effort to reduce the deficit by $1.2 trillion, Obama himself unsuccessfully proposed historic cuts to social security, Medicare, and Medicaid in 2011. In 2021, Obama-era economic advisors Larry Summers and Jason Furman insisted that further fiscal stimulus would “overheat” the American economy and worsen the post-pandemic inflationary crisis. The Bidenites defied their suggestions, passing still more fiscal stimulus while expanding the welfare initiatives Summers and Furman had opposed. Though many of these programs have expired, federal spending continues to vastly exceed the pre-pandemic norm. Neither the Harris nor Trump campaigns promised Social Security or Medicare cuts. The FY2024 budget deficit ultimately totaled $1.8 trillion. In short, fiscal policy is back.⁶

What this revival has not done is generate any meaningful lessening of the last half-century of inequality. Credit card delinquencies among the youngest households have risen sharply, while Americans in their thirties and below are falling behind on their auto loan payments at a rate exceeding the pandemic’s. Across nearly all metrics, American household debt, particularly for younger voters, is just shy of its levels on the eve of the Great Financial Crisis. And whether crushed by debt or not, household savings among those earning below $40,000 a year have only sunk since the pandemic. What appears to be a recovery in consumer spending—the figures frequently cited by the Bidenites in defense of their economic approach—is evidently driven by elite consumption. The Financial Times reported in November that the bottom 40 percent of American society accounts for just 20 percent of consumer spending; the top 20 percent account for 40 percent.⁷

Whether a market-making agenda succeeds or fails ultimately depends upon the state of markets themselves. Though the post-pandemic economy sat somewhere between the Right’s predictions of doom and the center-Left’s optimistic assertions that conditions were “as good as it gets,” the Biden manufacturing agenda faced persistent and structural headwinds: punishing interest rates, five decades of anti-competitive practices, and the deteriorated state of vocational training. The actual results of Biden’s industrial policy drive are, put simply, underwhelming: across most metrics—short and long-term —the picture remains grim for industrial revival.

America begins its second Trump era on the cusp of a sectoral recession in manufacturing. As of November, output has declined for nine straight months. Even in the protected trade environment of the Biden years, manufacturing has continued falling as a share of national employment. Of the administration’s much-touted 800,000 new industrial jobs, only 150,000 represent an absolute gain over the levels of February 2020. The Bureau of Labor Statistics projects manufacturing employment to decline significantly in the coming years—a figure which accords with a secular decline in U.S. manufacturing labor productivity, ongoing since 2010.⁸ These results are commensurate with the relatively meager scale of Biden’s industrial policy itself. The CHIPS Act “provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development”— though, as trade unionist and writer Dustin Guastella has argued, a return to postwar levels of industrial capacity would require that Congress pass the equivalent of a new CHIPS Act yearly for a decade.⁹

If “industrial policy” is defined as a conscious attempt by the state to reshape the composition of the national economy toward manufacturing, the actual existing results under Bidenism may very well be the opposite. For both technical and physical labor, the gig economy has ballooned: as many as sixty-four million Americans participated in freelance work in 2023. Domestic manufacturing and consumption of goods targeted by the Biden era’s industrial bills have surged, though dwindling savings and purchasing power have all but erased the opportunities to organically direct consumers away from dependence upon monopolies like Amazon and Walmart, bottom-of-the-barrel imports, and gigified cheap labor.

Another irony is that the business lobby itself remains deeply divided on the desirability of the Biden-era fiscal expansion. In the early days of the post-pandemic recovery, American high finance appeared to at least tolerate the administration’s historic fiscal stimulus. The return of inflation, however, revived latent Volcker-era hawkish sensibilities: among asset managers, the demand to raise interest rates became universal. Early in Biden’s term, Wall Street’s immediate goals—restoring consumer demand, restarting growth, and avoiding a “hard landing”—seemed to complement the administration’s broader vision of restructuring American capitalism toward greater equality and capital intensity. By late 2021, however, inflation had supplanted the threat of a “hard landing” as high finance’s prime concern.¹⁰ As the Biden legislative agenda took practical shape in 2022, finance grew more resolute in its opposition to debt-funded fiscal expansion, which it perceived as inflationary. The agenda which the Bidenites insisted was both pro-worker and pro-business turned out to be, in both groups’ eyes, neither.

Paradoxically, this is not to say that the American business lobby has opposed the industrial policy bills themselves. The CHIPS Act, for its part, seems more entrenched than ever. Days before the 2024 election, after House Speaker Mike Johnson declared it in the crosshairs of a Republican majority, he not only immediately retracted but apologized profusely for his comment. As of this writing, the continued existence of the Inflation Reduction Act appears less certain—though we can say, tentatively, that Joe Biden’s billions in grants, loans, and tax credits have scrambled traditional business and political alliances. Both the U.S. Chamber of Commerce and the American Petroleum Institute intend to defend the Inflation Reduction Act from the Republican majority.

What finance demanded, however, was deficit reduction. But neither Biden nor Harris were willing to take up this call. Its eventual expression came in the Trump campaign, whose boosters—former hedge fund manager and current Treasury Secretary Scott Bessent among them—made the coming austerity drive a centerpiece of their pitches to Wall Street. Bessent’s lengthy June 2024 Manhattan Institute address, a text paradigmatic of the Treasury Secretary’s economic philosophy, derides the Inflation Reduction Act, alongside the pandemic-era stimulus, as a Soviet-style “return to the discredited economic philosophy of central planning.” Yet his critique curiously spared the CHIPS Act despite the comparable scale of its industrial intervention.¹¹

While deficits have never bothered Trump, the “king of debt,” the composition of his coalition makes austerity an unavoidable element of his coming agenda. The Republican trifecta is in a cost-cutting mood, while a far-right, hard-money faction within the GOP triumphed over Trump’s late 2024 instinct to eliminate the debt ceiling during the congressional standoff over the Continuing Resolution. This is unlikely to involve repealing the CHIPS Act or a significant rollback of the IRA. We can instead expect the austerity drive to commence during the coming year’s congressional budgeting process: internal Republican documents suggest that Medicaid is chiefly among the programs in the crosshairs.¹² As such, whether a disheartened and cowed Democratic Party can organize an effective “Hands Off Medicaid” campaign will likely prove to be an early test of the direction of the Trump era.

The Limits of Liberal Fusionism

The Biden era of Democratic politics ended with the president’s warbled, rambling debate performance in June. The finance and tech billionaires who had secured Biden’s 2020 victory now demanded his withdrawal. In the Biden campaign’s last days, the president insisted that the capital strike against his campaign violated primary voters’ will—this, of course, made little sense: those same donors’ exceptional discipline during the primary cycle had ensured no respectable Democrat could mount a primary challenge to the apparently infirm president. By late July, an increasingly isolated and embittered Biden abandoned his campaign.

The high drama of the Biden era reached a crescendo during the hundred-day blitz of the Kamala Harris campaign. The political investors who had seized up following Biden’s defective performance reopened the spigot—never before had so much money flowed into a presidential campaign. In 2020, Biden charged donors $10,000 for a picture with the candidate; with Harris atop the ticket, her campaign raised the price tag to $50,000. In total, the campaign raised $1.7 billion, sourced from a coalition spanning nearly all of big business; Trump raised $1.1 billion, mainly from ideologically motivated billionaires. Even so, fundraising data indicates a clear rightward shift within finance compared to the election of 2020. Where donations from venture capital had favored Democrats in 2020 by a ratio of four to one, that ratio has declined to three to one; the same pattern persists for hedge funds. Private equity remains evenly split, though the largest players overwhelmingly favored the Republican Party. ¹³

It is the Democratic Party which, in 2024, represented the continued functioning of the American capitalist system. What few differences persisted between the capitalist class and the Democrats—the prospect of modestly expanded social services, a slightly higher tax rate, and deepening partnership with organized labor—hardly overrode the overwhelming favor shown to the party by the capitalist class, notwithstanding a small group of highly ideological billionaires. The economic philosophy of the Harris campaign thus amounted to what Justin Vassallo has dubbed “liberal fusionism”—an uneasy balancing act between big business, organized labor, fledgling green industries, and the liberal upper-middle classes.¹⁴ Cross-class coalitions are inevitable in a party system like America’s, though there are few examples of balancing acts of this magnitude lasting beyond a handful of electoral cycles. In the present case, it lasted only one.

The onus of managing a fragile leviathan is now upon the Republican Party, whose coalition resembles none other than that of Obama in 2008—though with the added support of the platform barons, finance, and big tech. But what Trump has inherited is not a business coalition with a uniform vision for American capitalism, but a series of highly sectional, often warring factions. Even within the capitalist class, we can begin to guess at what the ensuing fissures might be. The state is now America’s main engine of job creation: upward of 20 percent of new U.S. jobs since 2022 were created by the American government. The government-fueled healthcare and social assistance sectors created an additional 58 percent. Through the 2010s these figures respectively stood at 1 and 19 percent. And in more than half of American counties, public transfers account for over a quarter of residents’ income—a figure up from 10 percent in 2010. Expiring fiscal stimulus in 2025, the Financial Times predicts, will push American growth down a percentage point or more. America finds itself with a growth model more dependent than ever upon the state.¹⁵

The most credible austerity initiatives within the party are geared mainly toward the provincial obsessions of Elon Musk: see, for instance, the assault on USAID. As the next legislative cycle begins, however, the potential depth of Republican austerity may open opportunities for a new, if temporary, Democratic cross-class coalition premised upon a pro-growth restoration of the devastated welfare state. Whatever else changes, the Democrats can have confidence in their continued role as the party of stabilization. It will prove tempting, then, to retreat from Bidenism’s populist edges: Pennsylvania governor Josh Shapiro, a figure among the party’s most credible presidential contenders, has staked his second-term legislative agenda upon “aggressively” cutting corporate taxes.

Insofar as the Democratic Party remains the party of capital, however, it will continue to butt against the dilemmas of the Biden years. Big Business might accept an expansive fiscal policy, but once the business lobby perceives these technocratic maneuvers to be rebalancing power, the terms of the bargain become untenable. Tight labor markets and imagined inflationary spending violated the already constrained terms of the deal. One simply cannot sustain a campaign against the graft, usury, and rentier practices that define American economic life while maintaining a donor coalition on the scale of Biden’s in 2020. Even the regulatory pushes of the CFPB and the FTC proved too much for the platform barons to swallow: Facebook’s investigation by the CFPB, Mark Zuckerberg explained in his Joe Rogan Experience interview, marked his conservative political awakening.

Biden’s most fundamental promise was to “restore the soul of America.” His presidency, then, failed its most basic test: Trump has returned to office. But for the investors who bankrolled Biden’s 2020 victory, their gambit paid off: the economic settlement they secured remains intact. The Democratic Party fulfilled the purpose ordained by the China Strategy Group and CNAS in 2020. Tech has moved on to greener pastures: securing energy deregulation, reining in the CFPB, and defanging the FTC. The architects of Biden’s leviathan got precisely what they paid for. Whether the Democrats aspire to something more remains to be seen.

This article is an American Affairs online exclusive, published February 20, 2025.

---

Notes