Joe Biden has been here before.
When Barack Obama took office in January 2009, with Biden as his vice president, the country was mired in the Great Recession. Unemployment was soaring. Hundreds of thousands of Americans were losing their homes each month.
Today, Biden is president-elect, and the economy is at risk. The robust recovery from last spring’s coronavirus collapse is under threat from a new surge in infections — the dreaded fall wave that may crest just as the 46th president is inaugurated in 10 weeks.
The two recessions had vastly different origins: a mortgage meltdown in 2007 that almost brought down the banking system, and the novel coronavirus that emerged from China at the end of last year. But the lessons Biden learned as the Obama administration rebuilt from the housing crash will no doubt guide him as he tries to steer the economy through the pandemic.
“There are two key takeaways from the financial crisis,” said Thomas Kochan, a professor at MIT’s Sloan School of Management. “The need for swift and large-scale stimulus through government spending, and not using tax cuts as stimulus."
Kochan was referring to the controversial $830 billion stimulus package signed by Obama in February 2009. Many liberal Democrats complained that the legislation, called the American Recovery and Reinvestment Act, didn’t pump enough money into infrastructure and other direct job-creating programs, and needlessly cut corporate taxes. Despite the break for businesses, it took seven years for unemployment, which peaked at 10 percent, to drop below 5 percent, where it stood before the Great Recession.
Congress has authorized nearly $4 trillion in coronavirus rescue funds this year, with the biggest slugs going to stimulus checks for taxpayers, extended unemployment benefits, loans and grants to businesses, tax breaks, and Federal Reserve actions to bolster financial markets. There is bipartisan belief that more financial aid is needed, but Democrats and Republicans have for months been unable to agree on the size and scope of the package.
There’s a chance the lame-duck Congress strikes a deal before the end of the year, when extended federal unemployment benefits expire. If not, Biden, loath to risk another “jobless recovery,” is expected to quickly press for one at the same time he rolls out a strategy to contain the coronavirus.
More than 11 million Americans remain unemployed, even as the jobless rate dropped to 6.9 percent in October from 14.7 percent in April. The rate is more than 12 percent when counting people who want a job but aren’t currently looking and those who have part-time jobs but would prefer full-time work.
“We need to come together to understand that people have been really hurt,” said John Fish, chief executive of the Suffolk construction company in Boston. “Without stimulus, the downside spiral and negative momentum could be extremely detrimental.”
Fish sees a congressional compromise of about $1.5 trillion — less than the House approved earlier this year, but more than Republicans initially said they could live with — focused on a new round of Paycheck Protection Program loans and grants for small businesses, aid to state and local governments, and jobless benefits, though less generous than those included in the CARES Act rescue package approved in March.
Time is running out. With new daily COVID-19 cases exceeding 100,000 over the past week nationally and hospitals in some regions in danger of being overwhelmed, Massachusetts and other states are tightening up restrictions on businesses and social gatherings. That is likely to hinder hiring and consumer spending.
“COVID is central, and it governs everything,” said Bruce Monrad, chairman of Northeast Investors Trust in Boston. “If it gets worse, that brings shutdowns and the like into the equation.”
As Obama did in his first term, Biden will push beyond bolstering the social safety net. As a candidate he proposed spending $2 trillion on green tech-focused infrastructure and high-speed Internet.
Such massive investments would please progressive Democrats but are unlikely to get through Congress, especially if Republicans hold on to the Senate by winning the two runoff elections in Georgia. Biden will have to start more modestly, balancing what is economic necessity against what is politically possible.
One area where Biden can move quickly and unilaterally is trade.
President Trump roiled global trade by slapping tariffs not only on China, our fiercest economic foe, but allies like Canada and the European Union nations. Given his pro-union stance, and Democrats' concerns about unfair Chinese trade practices, Biden will not be an unabashed free trader. But executives say his actions will be much more predictable than his predecessor’s, making it easier for them to plan.
In the coronavirus era, keeping elementary and secondary schools open is a pressing economic issue, as working parents find it stressful, if not impossible, to juggle their jobs and child care.
Biden has pushed back against Trump’s demands to fully bring back students immediately. Biden’s support from teachers unions could mean that a return to classroom learning will proceed cautiously.
“It is essential for both the short-term health of the economy and the long-term health of our society for schools to reopen as soon as possible,” said Peter Ireland, an economics professor at Boston College.
In the nearly five decades since Joe Biden went to Washington, the United States has endured seven recessions. Biden’s top priority, inextricably linked with ending the pandemic, is to make sure number seven is a thing of the past.