Lost in the Mail
Trump to Biden, Congratulations; Biden to Trump, Thanks for the Vaccine
You might think that with the election behind us, reporting on the American economy would be less difficult – no pressure from the Trumpers to accentuate the positive and eliminate the negative, or from Biden fans to do the opposite. Alas, it ain’t so. The current condition of the economy is fraught with political significance: it is the base against which the performance of President-elect Biden (the appropriate tag for the man who will become the 46th President on January 20) will be measured. Especially when the mid-term elections spring upon us in 2022.
Not fair, of course. Presidents are not in complete control of the course of the economy. The White House does not have a secret room containing a lever marked “pull here for prosperity.” The President’s sway over the Federal Reserve Board is limited, as George H. W. Bush found when then-Fed chair Alan Greenspan refused to push forward a recovery that might have sent the Clintons back to Arkansas and renewed Bush’s lease on the White House.
It is important to start any appraisal of Biden’s economic inheritance by distinguishing between where the economy is from where it is headed. The virus-ridden economy is not in a good place. Some 22 million Americans suffered the trauma of being thrown out of work, and the unemployment rate is almost double the rate that existed in February, before China unleashed the virus on an unsuspecting world. Thousands of small businesses have gone bust, the jobs they provided gone forever. The economy is heavily dependent on infusions of deficit-financed cash from congress and the Fed’s zero-interest rate policy, among other stimulants. The pandemic has hit hardest those least able to cope with. And a new surge of infections is forcing many states that had relaxed restrictions on economic activity to reinstitute those restrictions. All due to Trump’s bumbling response to the virus sayeth the Biden team.
The team’s litany of woes is silent on the question of a vaccine. Trump was ridiculed when he said one would be available this year, and for wider distribution in 2021. He was right, as Pfizer and its German partner BioNTech announced one week after election day, a timing dictated by “the speed of science” and unrelated to the political calendar according to Pfizer CEO Albert Bourla who claimed he only learned of the favorable test results on Sunday before the announcement. The timing – Election Day November 3; CEO learns of test results for the first time, November 8; announcement of vaccine, November 9 – was bad luck for Trump.
Meanwhile, the President continued his policy of stepping on his own lines. Rather than taking credit for the record-setting availability of a vaccine – due largely to his de-risking of the pharmaceutical companies by making massive advance purchases that funded research, and scissoring miles of red tape – it is all eyes on his sulky refusal to acknowledge that he has lost the election, and to deny the Biden team access to important briefings that relate to national security.
Back to the economy. Biden may be describing where the economy’s at, retort Trumpers, but it isn’t where it’s headed. The economy has created 11 million jobs, offsetting half those lost to the virus and to shut-downs, driving the unemployment rate down to 6.9% from 14.7% in April. Consumers are flush with cash, even after paying down credit-card debt. The housing, auto, and other markets are booming. Supply shortages are cropping up everywhere, from vehicle showrooms to home furnishing stores. New business formation is breaking records. All due to a Trump-devised V-shape recovery.
These competing interpretations of the economic data result in widely different policy prescriptions. Trump, believing the health and economic costs of shut-downs exceed the costs of shuttering the economy, would continue such re-openings. Biden, now in the driver’s seat, believes containing the virus comes first, and is a necessary predicate to an economic recovery. But “the scientists” he reveres now seem unlikely to advise him to shut the economy down.
Dr. Anthony Fauchi now says “We can get a lot done without necessarily locking down” if we wear masks, wash our hands and observe physical distancing. “The consequences of a lockdown from an economic as well as a … morale standpoint are very, very important…. Don’t give up because help is really on the way.” Dr. Vivek Murthy, former Surgeon General and now a top member of the Biden Covid-19 task force agrees, “We’re not in a place where we’re saying shut the whole country down. We got to be more targeted. We should be thinking of this… more like a series of restrictions that we dial up or down depending on how bad the spread is taking place in a specific region.” The resounding sigh of relief coming from a Delaware basement means Biden knows he will not be faced with taking a wrecking ball to the economy to honor a campaign promise to do just that if the experts so advised.
Where we go from here will depend on just how much of Biden’s proposed mixture of tax and spending increases he can negotiate through a senate likely to remain in Republican hands. And how responsive state governors will be to his demand to impose stringent anti-Covid measures that inevitably will slow their economies.
The signs are mixed. Biden and Republican Senate Majority leader Mitch McConnell have a history of successful compromise and deal making. But McConnell commands a majority that has rediscovered its antipathy to deficit spending, more of which is on Biden’s wish list, while Biden presides over a party split between a pragmatic left and a “progressive” wing braying for blood.
Alexandria Ocasio-Cortez is calling for a list of the “Trump sycophants” who will try to “deny their complicity” and should be held “accountable” for supporting Trump. The “Trump Accountability Project” database already includes judges appointed by Trump. Michelle Obama says tens of millions who voted for Trump support “lies, hate, chaos and division.” And CNN’s Jake Tapper urges any who continue to support Trump “to think … how any future employers might see your character defined during adversity.” The road ahead will be long, strewn with potholes, possibly dead-ending before it reaches the promised land of comity. But don’t look to The New York Times for a road map. It’s page one headline: “Many on Right Reject the Call for ‘Healing’.”
The best guess is that a very unhappy Democratic left will be forced to accept less than half-a-loaf — but more than mere crumbs. If Biden has his way, corporate taxes and taxes on households with more than $400,000 in income will go up. Special tax breaks for fossil fuel producers, hedge fund operators and, oh yes, property developers, will be scrapped. A mash-up of infrastructure and green spending will likely get passed early on. But increases in capital gains taxes and new taxes on unrealized gains seem to be off the table.
Meanwhile, Senator Mitt Romney has it right: Trump is the 800-pound gorilla in the room. The representatives and senators up for re-election in 2022 – that campaign is already underway with a “Retire Rubio” super PAC running ads in Florida since election day – are not prepared to offend him and his 72 million voters. And he’s not going away: his aides are already planning his 2024 campaign to become the second president (Grover Cleveland was the first) to serve two non-consecutive terms — after figuring out how to have him exit, stage right, fantasy intact, without formally conceding he has lost.