When Joe Biden takes the oath of office on Wednesday, he inherits an economy beset by unknowns. Can the coronavirus be contained? How long will it take for most of us to feel safe again in restaurants, theaters, and airplanes? What permanent damage has been done to businesses large and small?
The answers to those questions and more will have to wait. First, the new administration and state and local officials must figure out how to vaccinate and frequently test a broad swath of the country.
That’s why this economic crisis is different — and in many ways worse — than the banking panics that sparked the Great Recession and the Great Depression. Fixing the financial system isn’t nearly as hard as stamping out a deadly and ever-changing virus.
“The crisis is unprecedented in our lifetime and multifaceted in ways that are especially challenging,” said Michael Klein, a professor of international economic affairs at Tufts University’s Fletcher School.
I reached out to Klein — who is also executive editor of EconoFact.org, which produces nonpartisan analyses of economic and social policies — to discuss the economic road ahead, the topic of a podcast he recently hosted with the respected financial journalists Binyamin Appelbaum of The New York Times, Scott Horsley of National Public Radio, Grep Ip of The Wall Street Journal, and Heather Long of The Washington Post.
Their conversation and my interview with Klein helped inform this quick look at three of the most pressing priorities for the Biden administration as it seeks to prop up the economy until we get to the other side of the pandemic.
Stop the spread
COVID-19 is out of control, even as the goal of corralling it with vaccines is tantalizing close. There have been 24.2 million confirmed cases in the United States, according to Johns Hopkins University, meaning more than one in 13 Americans have contracted the disease. Deaths surpassed 400,000 on Tuesday, and we have the fourth-highest national fatality rate per 100,000 people, after Italy, Czechia, and the United Kingdom.
Almost as distressing are the numbers on vaccine distribution. About 14.7 million doses of the Moderna and Pfizer vaccines have been given in the United States in a little over a month, according to data tracked by Bloomberg and the Centers for Disease Control and Prevention. At that rate, it would take 20 months to reach everyone.
Biden has promised to better coordinate and accelerate the vaccination campaign. In the $1.9 trillion relief package he proposed last week, he called for spending $112 billion this year on everything from supplies to testing to a public health job-creation program.
But time is tight.
“The longer this drags on, the more people fall through the cracks,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in an interview with Globe reporters and editors last week. “The longer you are out of the labor market, the harder it is to get back in.”
Klein said the new president should use the Defense Production Act to increase the supply of vials, syringes, personal protection equipment, and all the other gear needed to speed up vaccinations. Biden also would be wise to launch a massive public relations campaign to persuade as many Americans as possible to get the vaccine.
“He has to change the narrative,” Klein said, noting there is skepticism in many communities about vaccines.
Lend the states a helping hand
Some red, blue, and purple states are struggling financially. The pandemic has eroded tax revenue while increasing costs. State and local governments have cut more than 1.3 million jobs since March, a tally that will climb unless they get fiscal aid.
Biden wants to send $350 billion to the states as part of his rescue plan, money that will help balance their budgets and keep police officers, firefighters, and teachers on the job. Unfortunately, he’ll have to overcome resistance in the Senate, where Republicans refused to include significant local aid in the $900 billion relief legislation passed in late December.
“I’ve argued all along that states have the ability to moderate the economic harm caused by the COVID pandemic through reasoned, balanced measures that protect citizens without destroying their economies,” Senator Rick Scott, a Florida Republican, wrote last month in an op-ed for the National Review. “The federal government can play a significant role in boosting the unemployment-insurance program, propping up small businesses to avoid layoffs, and investing in vaccine research, development, and distribution. But it shouldn’t write blank checks to poorly managed states.”
Shoring up the safety net
Emergency measures approved by Congress last month included $600 in direct checks to adults and minor dependents, $300 a week in extra jobless pay, and the extension of unemployment coverage until the middle of March.
But the economy will muddle along, at best, until much later in the year: Wall Street expects a strong rebound to begin around June, but public health officials warn that it may not be until September when vaccinations enable a return to more normal social and business routines.
Biden has proposed more than $620 billion in safety-net spending to carry struggling Americans through much of the year: sending an additional $1,400 per person in direct checks; extending jobless benefits at least through September and raising the weekly bonus to $400; increasing the federal child tax credit and making it fully refundable for families who don’t have enough income to qualify for the entire benefit; and beefing up rental and food assistance.
As I noted last week, Biden’s plan offers people financial relief but would also boost the economy. It would increase economic growth this year to almost 8 percent, up from an estimated 4 percent without new fiscal stimulus, according to Moody’s Analytics. It would help drive down the jobless rate from 6.7 percent to as low as 4 percent by the end of 2022, nearly a year sooner than if no additional rescue spending is approved.
The spending would be financed by government debt, adding to the ballooning national debt. But with interest rates near zero and the need so great, now isn’t the time to worry about borrowing.
“I don’t think it’s too much,” said Rosengren, the Boston Fed president. ”It is very appropriate for fiscal policy to be highly stimulative at this point.”
With just a one-vote margin in the all-important Senate (with Vice President Kamala Harris providing the tie-breaking vote), Biden faces a tough legislative battle.
Can he pull it off? Add that to the list of economic uncertainties we face this Inauguration Day.