Analysis: Biden returns to battle another economic crisis, but it’s no Great Recession

In this news, we discuss the Analysis: Biden returns to battle another economic crisis, but it’s no Great Recession.

SAN FRANCISCO / NEW YORK (Reuters) – Joe Biden returns to the White House to lead the United States amid an economic crisis after defeating President Donald Trump in Tuesday’s election, a turn of events that could spark a bizarre feeling of deja vu for the former Democratic vice-president.

Unlike 2008, when the country elected Democrat Barack Obama and his running mate Biden as the global economy faltered from the subprime mortgage crisis and the collapse of the Lehman Brothers investment bank, the worst of the Current economic recession may already have passed, economists and analysts say.

“We were still falling into the abyss,” recalls Donald Kohn, vice chairman of the Federal Reserve during the Great Recession of 2007-2009, which was the worst American recession since the Great Depression until then. may it be eclipsed by the current crisis.

As Obama and Biden took office in January 2009, unemployment in the United States was still rising – it would not peak until 10 months after the start of their first term, when it reached 10%.

Biden, who had spent more than a quarter of a century in Congress before becoming vice president, helped push through an $ 800 billion stimulus package that was criticized by Republicans as a waste and by those on the left. like too small. “We know some of this money is going to be wasted,” he told business leaders here in June 2009 with characteristic frankness, urging them to accept the package.

The unemployment rate in the United States has not fallen below where it was when Obama and Biden were elected until a year after starting their second terms.

Today, the economic landscape is ugly again, with the US economy technically in a recession and 3.5% smaller than it was at the start of 2020, even after posting record third quarter growth.

Millions of Americans, especially in the restaurant, travel and entertainment industries, remain without work, with no immediate job prospects in sight.

In the worst-case scenario, the current downturn could expand an American underclass dominated by women and minority workers.

The coronavirus continues to rise across much of the United States, and consumer scares and new lockdowns will limit prospects for economic growth.

But since the current crisis started with closures in March to prevent the spread of the virus, the federal government has delivered billions of dollars in stimulus and unemployment has fallen sharply from its April high of 14.7% to 6. , 9%. It is predicted to continue to decline throughout next year, not to increase as it did in 2009.

“It’s still a soft economy… the problem will be to complete the recovery,” says Kohn.

STIMULATES AND THE VIRUS

Biden’s economic agenda is likely to focus primarily on getting the country out of the coronavirus crisis, both as a health and economic issue.

Much will depend on passing a pandemic relief package and distributing a vaccine that could be ready in early 2021.

Many U.S. states are reporting record new coronavirus infections and nearly 6,000 Americans died last week from COVID-19 disease caused by the virus. On Friday, a day before the return of elections in the battlefield state of Pennsylvania, which catapulted Biden to victory, the United States recorded more than 130,000 new cases, a single-day record.

“This president will need to guide the American people and the American economy towards health before they can consider structural policy changes,” said Beth Ann Bovino, chief US economist at S&P Global Ratings.

Biden has encouraged wearing masks and social distancing to slow the spread of the virus, and is generally expected to use established channels of the US government for vaccine deployment.

Senate Majority Leader Mitch McConnell signaled Wednesday that he was open to a new coronavirus aid bill in the “lame” session before newly elected members of the Senate and House of representatives of the United States do not take an oath.

That package will likely be smaller than what Biden would have targeted if Democrats took over the Senate on Tuesday, but might be enough to prevent the recovery from stumbling. Senate control remains uncertain as races for two Republican seats in Georgia are set to go to the second round of voting in early January.

Getting a vaccine and more stimulus for the public would set the stage for a stronger recovery in the first months of 2021.

“There may be more favorable political winds in an improving economy,” said Jason Furman, who was the White House’s top economic adviser for much of Obama’s second term as president.

Biden’s plans include a federal minimum wage of $ 15, increased support for unions, and expanded protections for “on-demand” workers. He also pledged that his green energy policies would create millions of jobs, although some analysts are skeptical.

But as Republicans seem less likely to lose control of the Senate, Biden’s broader agenda, shaped by a coalition of moderate and more left-wing supporters, could be stalled.

Report by Ann Saphir and Jonnelle Marte; Editing by Heather Timmons, Dan Burns and Paul Simao

Original © Thomson Reuters

Originally posted 2020-11-07 13:56:12.

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