America’s financial future definitely hung in the balance this year. Joe Biden is set to inherit an economy that has seen the absolute worst. We’ve seen record unemployment, businesses declaring bankruptcy, an eviction crisis, not to mention the fact that we’re heading into winter, a time when COVID-19 is expected to increase the death toll manifold, devastate hospital systems nationwide, and potentially lead to more lockdowns.
In 2020, pandemic policy equates to economic policy. Thus, a major part of Biden’s message on the campaign trail came down to how he was the better person to combat the pandemic’s devastating impact on the economy. A stimulus plan under Biden is likely to include extended crisis unemployment programs, an extension of the paycheck protection program, massive-scale testing, nation-wide PPE distribution, a national contact tracing force and covering health insurance costs for the newly unemployed. Biden is also expected to push for emergency aid to state and local governments, an issue that has turned partisan in recent months.
However, this stimulus deal is only one part of Biden’s pandemic recovery plan. What he actually wants is something much bigger: for the country to spend over $7 trillion on infrastructure, which includes the creation of 10 million clean energy jobs, with increased spending on housing, education, economic fairness, and health care. He has placed all his ideas under a slogan, “Build Back Better.” Job creation is key to Biden’s plan to combat COVID. In addition to millions of clean energy jobs, he also wants 100,000 new jobs in the public health sector to strengthen the medical workforce. His dream also includes wanting to make sure that there are more unionized manufacturing jobs and more robust domestic supply chains for essential goods, a problem Americans didn’t realize was so dire until this year, when there was a wave of virus-induced shortages of critical items. Biden’s infrastructure plan is a huge part of his proposal, which reportedly could generate 18.6 million jobs in the next four years, if Democrats take the Senate. Out of $7 trillion dollars he wants to spend, 2 trillion is for infrastructure, clean energy, and getting Americans to work in energy fields.
Addressing the broad racial wealth gap is the final pillar of Biden’s plan for the economy, an issue that was highlighted during the pandemic. His plan includes tens of billions of dollars invested in minority-owned businesses and a college affordability program, paving the way for a free public university education for families with an income under $125,000. Biden has also promised that 40% of the $2 trillion he wants to invest in clean energy will go to disadvantaged communities. To pay for all of this, Biden wants to tax higher-income Americans and corporations. He wants to raise taxes for households with incomes above $400,000 a year, and limit their deductions. He has also talked about raising the corporate income tax rate to 28%, from the previous 21%.
So, what does this mean for the economy in the next few months? Experts say that the White House alone actually has little to do with how the economy will play out in 2021. Regardless of who is in the Oval Office, the following months are expected to be a time of increased COVID cases, which will call for additional restrictions on engagement in local economies to keep the body count down. This is not a White House decision, but rather a city or state-level decision. Hence, how the economy continues to recover is tied to whether or not people are able to spend money. The biggest difference would be if there is a way to get the fiscal stimulus policy passed before the holiday season, when consumer spending should be increasing.
The dynamics of the recovery talks will depend on whether the economic plans of Mitch McConnell and Nancy Pelosi – the Senate majority leader and Speaker of the House of Representatives, respectively – agree with those of each other, as well as that of Biden. Meanwhile, as both Democrats and Republicans set foot in the White House and the Congress, the rest of the world awaits their decision, which will hopefully undo the economic devastation that has arrived with the pandemic.