Dec 2, 2020 - Economy

Biden's economic team will write a new crisis playbook

Illustration of seesaw with large briefcase weighting one side down

Illustration: Eniola Odetunde/Axios

Joe Biden's economic team faces a daunting task helping the millions of Americans who have lost their jobs or otherwise been financially ravaged by the coronavirus. But most of them have first-hand crisis experience, dating back to when Barack Obama inherited a crumbling economy when he took office in 2009.

Why it matters: Most of President-elect Biden's economic nominees served in the Obama administration, and wish that they could have gone bigger to help America recover from the 2008 financial crisis. But it's not going to be easy for them to push through massive fiscal spending in 2021.

The big picture: We're facing "an American tragedy," said Biden's nominee for Treasury secretary, Janet Yellen, on Tuesday. "It is essential we move with urgency. Inaction will produce a self-reinforcing downturn, causing yet more devastation.”

Data: BLS via FRED; Chart: Andrew Witherspoon/Axios

By the numbers:

  • Employment is much worse than during the Great Recession. The total number of jobs in America is still more than 10 million below its peak, even after a significant rebound.
  • The unemployment rate is currently 6.9% — better than the 7.8% that Biden inherited when he took office as vice president in January 2009, and much better than the 9.9% level that it hit later that year. That's partly because millions of jobless Americans, including many parents forced to stay home to help school their kids, aren't counted as unemployed because they're not actively looking for work.
  • GDP is about 3.5% below its peak, roughly the same as in the first quarter of 2009.

Flashback: "Anyone who was involved from Treasury, from Fed, in the financial world, will tell you that the U.S. economy needed more of a boost for longer than it got” back then, former Treasury Secretary Jack Lew, who also served as the head of the Office of Management and Budget under Obama, tells Axios.

  • “If you look through [Biden’s] team ... I don't know anyone who doesn't agree with that."

What they're saying: "When the Obama team came into office, much of the damage to the economy was still ahead of us," says Harvard economics professor Karen Dynan. "The worst is behind us now. The economy has the potential to recover much more quickly, but that's going to depend on getting fiscal policy right."

  • Biden's economic team will want to maximize new government spending — to state and local governments, to the jobless, to struggling restaurants and other small businesses, and to a long list of other recipients.

Between the lines: This crisis is very different from the one 12 years ago. For one thing, because it's not a financial crisis, it can't be solved by lending money to the financial system.

  • Today, the list of entities that need government aid is much longer than it was in 2009, when the $831 billion American Recovery and Reinvestment Act was passed.

Biden's nominees are deeply experienced in the art of getting fiscal legislation pushed through Congress. But no one yet knows how cooperative Mitch McConnell is going to be — or even whether he's going to command an outright majority in the Senate.

  • McConnell unveiled a $333 billion stimulus proposal on Tuesday — much smaller than the $2.2 trillion that Biden, along with Democratic Congressional leaders, has said the economy needs.

What to watch: The nominees for Biden's economic team are more outspoken about race, income distribution and other social issues — and a "few clicks to the left" of Obama's economic team, according to AEI's Michael Strain.

  • Take Heather Boushey, whose career has largely focused on economic inequality.
  • Yellen, when she was Fed chair, voiced concern about the widening income gap. That concern has grown louder. She's also been outspoken about climate change.
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