Biden, His Time

It’s the Economy Stupid

The first and critically important aspect of the Biden presidency is simply to ignore and not engage in any sort of give-and-take with Donald Trump. Trump and his ardent followers have pledged to remain a constant thorn in Biden’s side, to gridlock Congress if they can and turn the President-elect into a one-term president. That just might happen anyway by reason of Mr. Biden’s age, but becoming defensive with Trump (based on success claims that are dramatic fabrications) empowers Trump and keeps him in the headlines. Remember Trump’s failure to lead combined with his ability to mislead and destabilize has led to yet unmeasured tolls of suffering and death plus a two-fold slam to the economy: one from mismanaged trade policies and a bigger one of failing to understand that the pandemic cannot be delinked from economic recovery.

That the Trump administration failed to achieve the economic growth rates from both the Clinton and Obama eras is mired in a constant mythological spin that Trump got the economy right, and they did not. Wrong. His destabilizing and erratic push-me/pull-you tariff wars, tilting toward bilateral trade agreements in a multilateral world, believing in bullying and punishment through trade policies and his racist “America First” slogan (a Ku Klux Klan slogan from the 1920s) trade mantra have created a massive economic disadvantage for both US farmers and “business America.” Trump is over. Time and demographic shifts are not on his side. His legal woes are just beginning. His health is already beginning to pull him down; his weight, eating habits and exposure to the inevitable aftereffects of his bout with COVID-19 will not combine well with the stress of his election loss. 

Obviously, containing the pandemic is Biden’s “job one.” Trump’s “Operation Warp Speed” has created skepticism in the efficacy of a vaccine that must be overcome if herd immunity and economic recovery are going to work on a reasonable time frame. Scientists combining with influencers in a massive social media campaign are necessities once one or more vaccines are proven safe. Those same influencers can help convince as many Americans as possible to “mask-up” and practice social distancing until the virus is contained. Otherwise, we can expect at least another million infections, with long-term effects now showing up in those who were otherwise asymptomatic, and 100,000 additional deaths. Further, Trump’s failure to provide the necessary funding and infrastructure for local deployment of a viable vaccine must be remedied immediately. 

While some Wall Streeters see a V-shaped recovery if we can just get everything open immediately, I suspect they either failed their US history courses or didn’t take them. Recovering from massive devastation never is V-instantaneous. NEVER. Economies left to stagnate and follow a path of laissez faire governmental policy can sputter for years or die entirely (think: banana republics and post WW-I Europe and the Great Depression in the United States). 

The pandemic recovery economy needs two distinct capital infusions: one to get those Americans (individuals and businesses) through until there is COVID-19 containment, and two to reprime the American economic pump. We need to very careful about our metrics of success. A rising stock market and business tax cuts do not create jobs and promote general economic well-being. Likewise, obsessive belief in a rising gross domestic product can be equally misleading. If the top 5% of earners explodes with success but the rest of the economy either stagnates (at already depressed levels) or even contracts, GDP could still rise. We need to focus on “average, mean and median” income metrics and a detailed analysis of unemployment statistics. 

By the time Biden takes office, the next national election will take place at the end of 2022. Stimulus polices will not face the instant scrutiny that Congress faced (faces, if you take the Georgia runoff into account) in the past few months. If Congress can indeed get out of its own way, find a bi-partisan compromise, and work for a genuine and sustainable recovery. Or it can dig in stubborn heels, resurrect the Trumpian blame-game, and watch public animus rise to the boiling point. There are obvious priorities.

First, and hopefully Congress learned this from its uncoordinated initial pandemic stimulus efforts, just throwing money “out there” is wildly inefficient, only partially effective and generates deficits without sufficiently offsetting benefits. Second, wage earners and small businesses can be the most vulnerable in the aggregate but lack the large-scale visibility of big business and market segments with major lobbying capacity. It is on these smaller individual units that the initial, phase one stimulus allocations must be focused. Lesson: target precisely what you want to fix or help, create monitoring and tracking systems and enforce responsibility. Corollary: prepare to adjust your allocations to smooth out unintended consequences and fill the unanticipated cracks.

Thus, phase one is keeping us alive. Writing for the November 20th TheConversation.com, R. Andrew Butters, assistant professor of business economics and public policy at Indiana University and a visiting scholar at the Federal Reserve Bank of Chicago, explains: “One likely focus for the Biden team will be income support, much like what we saw in parts of the Coronavirus Aid, Relief and Economic Security Act, which offered generous unemployment benefits – the last of which will expire in December. But not all aid is created equal, and economists favor stimulus with large multiplier effects – that is, how much economic activity is generated for every dollar of spending.

“For example, if I have US$1,200 in extra income from the government, I might go out and spend some of that on a nice meal with my family at a local restaurant. The restaurant then uses that money to pay its employees and buy more supplies from other businesses, both of which then spend the money on other things they need. The more everyone spends from that initial dollar, the higher the multiplier. If a lot of people like me use that extra money for savings or to pay off credit card debt, the multiplier goes down, making the stimulus less impactful.” How long, the amount and the number of such stimulus packages will truly depend on whether Americans are truly willing to do what it takes to contain this pandemic. Failing to apply scientific reality simply draws out the pain and creates a much deeper hole to crawl out of. 

Phase one – income support – keeps us alive, but without additional capital infused into the system, re-priming the pump (phase two), the expected recovery could take a decade or more. As Professor Butters puts it: “[W]hile providing more income support will help those most hurt by the pandemic, it won’t necessarily bring jobs back. Stimulus packages that attempt to invest in certain sectors of the economy to generate demand for labor and create jobs could go further in providing a longer-term impact on the economy. 

“So I wouldn’t be surprised if the administration also provides stimulus that aims to bolster hiring, such as by spending billions of dollars on infrastructure. The 2009 American Recovery and Reinvestment Act that Biden worked on included this type of infrastructure spending.

“Stimulus spending should also not overlook state and local governments, which are in desperate need of support to avoid severe cuts in services, such as transportation, education and health, which would seriously hamper any economic recovery.” Beware of that old, mega-failed Republican mantra of believing that tax cuts for the rich trickle down to the rest of us. They never have, and I suspect, they  never will. 

Assuming Congress is even willing to get there, there are questions as to whether the government uses private industry to implement the infrastructural/new job growth or adopts an FDR New Deal direct employment model (a la his Civilian Conservation Corps and the Works Progress Administration). 

The benefits for the nation as a whole are obvious: improved economic efficiency with enhanced infrastructure, a direct assault on climate change by focusing on alternative energy and the ability to target particularly hard hit regions of the United States where economic realities have severely hurt the local industries. This same vigor could also apply to reconfiguring our national healthcare policies to insure access to affordable medical care for all Americans while expanding job growth in the sector. Yes, we can!

I’m Peter Dekom, and there are many paths to bring America back to where it should be and can be… and many more paths to accelerate the great unraveling.