Biden’s Rescue Plan Is a Start. Now Think Big.
(Bloomberg Opinion) -- Tens of millions of Americans are scrambling to keep a roof over their heads, food on their tables, education for their children and access to health care during an epic public health and economic crisis. President-elect Joe Biden acknowledged that hardship Thursday night by calling for a $1.9 trillion federal rescue package that would deliver urgently needed — but temporary — aid to workers and families as well as to state and local governments struggling to support them. A second, more ambitious recovery plan to address longer-term problems such as infrastructure and climate change is also in the works. But even broader vision will be required to reverse lingering damage to the economy.
Biden’s rescue plan follows two federal relief efforts that jointly clocked in at about $3.6 trillion in spending. It calls for direct payments of $1,400 to individuals, $400 a week in supplementary unemployment benefits through September, $350 billion for state and local governments, and various other funding for schools, vaccination, child care and food and rental assistance. It would also raise the minimum wage to $15 an hour.
While additional relief is obviously necessary, the key assumption underlying the rescue efforts so far, including Biden’s, is that all the country needs is a bridge to transport it safely past the pandemic. Then the economy, ideally, will be back on solid ground, businesses will rebound, Americans will return to work, and government coffers will be replenished with fresh tax revenue.
By the looks of traditional economic measures, that day may not be far off. Leading economic indicators are nearing their pre-Covid levels (and in some cases have surpassed them) after dropping sharply in the spring. Gross domestic product, the broadest and perhaps most closely watched measure of the economy, rebounded strongly in the third quarter and is estimated to have grown at a real annual rate of 7.4% in the fourth quarter. Headline unemployment has fallen to 6.7% from more than double that rate in April.
But all is not well.
More than 10 million Americans are still out of work, according to the Bureau of Labor Statistics, and that doesn’t include about 4 million workers who have left the labor force since February — and an additional 6 million part-time workers who can’t find full-time jobs. The labor market also appears to be moving in the wrong direction. Nearly 1 million Americans filed for unemployment last week, the highest one-week tally since August.
And that may understate the economic hardship facing Americans. A recent study published by the Center for Law and Social Policy, a nonpartisan research group that advocates for low-income people, found that about one in 10 workers were underemployed in 2016, double the number the BLS reported at the time. The jobs tended to be in education, retail, travel, food and entertainment — the areas hardest hit by the pandemic. The number of underemployed workers is almost certainly higher today, which may explain why an alarming number of Americans, upward of 50 million by one estimate, face food insecurity.
These numbers raise the worrisome possibility that the severity and duration of this pandemic has already done longer-lasting damage to the economy, a prospect that economists and policy makers desperately hoped to avoid when this crisis began. If that’s the case, it may take years for millions of unemployed and underemployed Americans to return to work. If so, Biden’s rescue plan — which, like its predecessors, is a short-term financial Band-Aid — won’t be enough. And Congress, even one controlled by Democrats, isn’t likely to keep cutting trillion-dollar checks every few months.
Even if jobs return in the numbers that preceded Covid-19, economic inequities that have been building for decades — and that have no doubt inflamed the social and political unrest gripping the country — will most likely still be unresolved. Wage inequality, as measured by the Gini index, began climbing in the 1980s and 1990s. Employment-to-population ratio last peaked in 2000. Household incomes haven’t kept up with the cost of living, leaving half of households with less than a living wage even before the pandemic began.
As we have noted before, tackling these issues isn’t simply about morality and social justice, although those are good reasons, too. Americans have enjoyed lush economic growth for decades because the country has had an unusually large, healthy, diverse and well-educated middle class; consumer spending fuels roughly 70% of growth. With the middle class and workers withering, the economy’s underpinnings will wither alongside them.
This is where Biden’s recovery plan can play a crucial role in addressing both the short- and longer-term risks to the labor market. Taking on big pressing problems, such as infrastructure and climate change as well as public health and education, will require a robust labor force. A federal jobs program is an opportunity to marshal that labor force while providing a living wage to millions of unemployed and underemployed Americans. It could lift the wages of all workers by competing with private-sector employers, particularly as the economy emerges from the pandemic. It could also support younger and future workers through funding for vocational and technical training in industries that are most in demand.
Biden’s plan isn’t there yet, but it should be. What’s needed is vision and will. With narrow control of both chambers of Congress for the next two years, Biden can try mustering the will and a legislative coalition. Now let’s see about the vision.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
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