Feb 6, 2021

Axios Deep Dives

Good afternoon. After President Biden's first two weeks, here's a Deep Dive — led by Axios business managing editor Aja Whitaker-Moore — on his team, his plans and the outlook for this new era of Democratic control.

  • Smart Brevity™ count: 969 words ... 4 minutes.
1 big thing: A lucky president

Photo illustration: Eniola Odetunde/Axios. Photo: Kyle Rivas/Stringer via Getty Images

Joe Biden assumed office with more economic upside than any other president in recent history, writes Axios Business Editor Dan Primack.

Between the lines: Presidencies are creatures of circumstance. For Biden, it's a smoldering economy atop a solid foundation, with a rebuild plan whose primary materials (vaccines and stimulus) are in unusually high supply. If economic arrows turn red, it likely means Biden botched the blueprint.

  • Donald Trump inherited a longstanding recovery, which meant he could help accelerate growth but had no recession to reverse.
  • Barack Obama was faced with a financial crisis born of deep, systemic design flaws. There was no vaccine to cure what ailed America's economy.
  • George W. Bush campaigned in the last days of the dotcom bubble, which already had begun bursting when he entered the White House.
  • Bill Clinton inherited a recession, but only a relatively mild one.

A big difference between 2020 and past recessions is that 2020 was caused by an external event — the economy was the victim, not the culprit.

  • The Trump economy certainly didn't work for everyone, but many of its macro strengths could remain beneath the ash, including pre-pandemic wage growth and decreases in poverty rates.
  • Biden can dig a lot of them up, just by succeeding on vaccine distribution. He then can leverage Democratic control of Congress — and America's desensitization to big numbers — to throw money at short-term economic problems.

Between the lines: Tailwinds don't necessarily result in a smooth flight. Biden's biggest risk could be the fact that American business, investors and most voters expect success. Anything short of the Roaring 20s (Part II) would bring disappointment.

The bottom line: Never before has a bad economy looked so good for a presidential legacy.

2. State of economic affairs
3. Priced for perfection

Photo illustration: Eniola Odetunde/Axios. Photo: Getty Images 

It would be hard for things to get much worse than 2020. But Wall Street fund managers may be pricing in too much optimism, Axios Markets author Dion Rabouin reports.

  • Why it matters: Projections from economists and government offices — for falling unemployment, rising GDP and a booming stock market — are setting Biden up for success. But high hopes dashed could lead to blowback.

What's happening: The Congressional Budget Office expects U.S. growth to return to its pre-COVID level midway through this year, and for the unemployment rate to reach 6% by year's end.

  • Goldman Sachs economists are even predicting that U.S. GDP growth in the third quarter will reach 10% — a milestone without modern precedent, save for the 33% growth in Q3 2020 that followed the 35% contraction in Q2.

That's got asset managers expecting big returns from the stock market this year and businesses banking on rising sales and profits.

  • But even before the recent run-up in equities prices, the stock market was "priced for perfection," John Lynch, CIO of Comerica Wealth Management tells Axios.

Go deeper.

4. 45 vs. 46 on the stock market
"Finished off the year with the highest Stock Market in history. Setting records with your 401k’s, just like I said you would. Congratulations to all!"
— Trump's final tweet about the stock market before his account was suspended by Twitter.
"Just in the last three years, during this crisis, the billionaires in this country made, according to The Wall Street Journal, $700 billion more. $700 billion more. Because that’s his only measure. What happens to the ordinary people out there? What happens to them?"
— Biden at the last presidential debate, Oct. 22.
5. Inheriting inequality
Data: Bureau of Labor Statistics, Federal Reserve, Peter G. Peterson Foundation. Chart: Andrew Witherspoon/Axios
6. Economic sphere of influence
Graphic: Danielle Alberti, Sarah Grillo/Axios

Here are some administration players who have Biden's ear on the economy, from Axios' Courtenay Brown:

  • Treasury Secretary Janet Yellen was Fed chair under Obama.
  • Brian Deese, director of the National Economic Council, was an executive at BlackRock who headed up sustainable investing and an NEC deputy director in the Obama administration.
  • Susan Rice, domestic policy adviser, will oversee major portions of Biden's "Build Back Better" plan.
  • Jared Bernstein, a longtime economic adviser to Biden, is a member of the Council of Economic Advisers.

What ties them together: "They clearly have as one of their core values how policy will affect racial equity in a way that I think is new," Heidi Shierholz, a labor economist at the left-leaning Economic Policy Institute, told Axios.

Congressional Democrats, thanks to a (slim) Senate majority, are taking the helm of committees that will shape the business world.

  • Sen. Elizabeth Warren will join the Finance Committee, which oversees tax legislation — a cornerstone of Biden's "Build Back Better" plan.
  • That committee's new chair, Oregon Sen. Ron Wyden, told CNBC this week he'll prioritize tax reform.
  • Others include: The new chair of the Budget Committee, Sen. Bernie Sanders, plus Sen. Sherrod Brown, the new Banking Committee chair.

What to watch: The team's first big test is weeks away, when unemployment benefits for millions of Americans will expire without additional action.

7. Reimagined policy toolbox

Illustration: Sarah Grillo/Axios

The Biden administration is reinventing an economic toolbox to address a crisis unlike anything the world has seen in a century, Axios' Kia Kokalitcheva and Felix Salmon write.

Reality check: Whole sectors of the economy are intentionally paralyzed to avoid more catastrophic spread of the virus. Meanwhile, many white-collar telecommuters are doing better than ever.

  • Biden's economic plan starts with the current $1.9 trillion rescue package. Once that's passed, he intends to turn to large-scale infrastructure investments that are aimed at creating American jobs and reinventing the post-crisis economy for a zero-carbon world.

A new New Deal: Biden’s “Build Back Better” plan, which includes medium- and long-term efforts to upgrade U.S. infrastructure with an eye on curbing climate change, could prove an effective way to boost economic recovery.

  • Large-scale projects can create a lot of jobs, and re-skilling and education programs may help the labor force longer term. And that could have effects on U.S. productivity.

What we're watching: Tax increases could help some deficit hawks in Congress feel more at ease with massive spending. But Biden hasn't focused on that yet.

Go deeper.

🎧 Hear Jonathan Swan in our podcast series called "How it happened: Trump's last stand." And check out the full episode library of his fly-on-the-wall "Off the rails" series.