Analysis: For Biden, ambitious economic plans may wait on battle with
coronavirus
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[October 20, 2020]
By Howard Schneider
WASHINGTON (Reuters) - The Democratic
party's sprawling presidential primary last spring offered a wide-open
debate on economic policy ranging from the merits of wealth taxes and
other ways to ease U.S. economic inequality to aggressive proposals for
reducing reliance on fossil fuels.
Yet even a "blue wave" victory next month giving Democrats control of
the White House and both chambers of Congress may strand that sort of
transformational economic thinking on the sidelines until the battle
against the coronavirus is won.
While an electoral victory by Democratic contender Joe Biden might shift
the U.S. response to the pandemic, he would also have to restore public
confidence in things like restaurant dining, and get the country's
commercial and work life back to normal - in short, navigate massive
uncertainties surrounding vaccines, public behavior, and divergent local
approaches to a common health problem.
"It is extremely hard to imagine a sustainable, robust recovery absent
virus control. So that is step one," Biden economic adviser Jared
Bernstein said in a recent webcast discussion, when asked how an
incoming administration would juggle a wide set of competing priorities.
"Part two," he said, will be the likely need for another fiscal package
to help families and businesses through the current recession. After
that will follow what Bernstein called the "more permanent lasting
agenda" of investments in clean energy or broadening healthcare
coverage.
The focus on the virus and the recession does not exclude pursuit of
some longer-term aims, Bernstein said. For example, expanding and
improving child care could help parents return to the workforce, and
infrastructure investments could generate desperately needed jobs.
Still the state of the U.S. economy two weeks before the election means
that, rather than a clean slate to write economic policy equal to the
sweep of Democratic aspirations, Biden would face an ongoing pandemic,
the aftermath of 22 million lost jobs, a public unable to mingle freely,
and major industries suffering depressed demand.
EMERGING SCARS
Nathan Sheets, chief economist at PGIM Fixed Income, sees a troubling
litany of problems: Jobs will be harder to find, the economy's
productive capacity is lower, and many households and businesses will
emerge with weaker balance sheets.
"Will those weaker balance sheets lead to less consumption, investment,
less risk taking? These are scars that are emerging," Sheets said.
That suggests a presidential transition spent deciding whether federal
dollars should be allocated for direct aid to families and local
governments or for the more strategic reforms of Biden's "Build Back
Better" agenda, say his proposed $2 trillion investment in clean energy,
and whether to follow through on promised tax increases during a
recession.
The more ambitious programs hinge not just on the virus, but the
composition of the Congress.
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U.S. Democratic presidential candidate Joe Biden delivers remarks at
a voter mobilization event at Riverside High School in Durham, North
Carolina, U.S., October 18, 2020. REUTERS/Tom Brenner/File Photo
While the larger economic proposals are high priorities, "if there
is a Republican Senate Joe Biden is going to have to dramatically
scale back his proposals," said Neera Tanden, president of the
Democratic-aligned Center for American Progress think tank. "That is
reality."
Big reform in a crisis is not impossible.
Barack Obama inherited a financial shock and recession when he
became president in 2009 but still managed to pass the signature
Affordable Care Act a year later - with Congress under full
Democratic control.
'FACE OF A SITTING PRESIDENT'
There will not be a leisurely transition.
While coronavirus vaccines are in development, the timetable is
unclear, and opinion polls show a significant public hesitance to
get one.
"(Biden) will be responsible for restoring trust and setting a path
the day after he is elected," said Douglas Holtz-Eakin, a Republican
policy adviser and president of the American Action Forum think
tank. He "needs to be prepared to have the public face of a sitting
president pretty quickly...rolling out people who are clearly
qualified and know how to run" agencies like the Centers for Disease
Control and Prevention.
That could stymie attention to the larger vision of an economy
reshaped to provide fairer outcomes and more opportunities for a
broader set of people, a narrowing of economic gaps between Black
and white, and progress toward a more sustainable energy mix.
The big unknown for a new administration: Just how long dislocation
from the pandemic will last.
Economists expect economic output may remain below pre-pandemic
levels for perhaps another year, with unemployment returning even
more slowly to the low levels hit in 2019.
For a President Biden, that likely means a persistent economic drag
that grows worse the longer the virus is untamed.
"Even just a pickup in the virus could certainly cause not just the
worry of infections and deaths...but of people self-quarantining,
not going outside, staying home more," Standard & Poor's Global
Chief Economist Beth Ann Bovino said. "The economy would get a
knockdown."
(Reporting by Howard Schneider; Editing by Dan Burns and Andrea
Ricci)
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