Even With $900 Billion Stimulus, Biden Faces Fragile Economy <font color="#6f6f6f">The New York Times</font>
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Continue reading the main story
$900 Billion Won’t Carry Biden Very Far
Despite new pandemic aid, he confronts an economic crisis unlike any since he last entered office in 2009. And political headwinds have only stiffened.
With his presidential inauguration just weeks away, Joseph R. Biden Jr. is confronting an economic crisis that is utterly unparalleled and yet eerily familiar.
Millions of Americans are out of work, small businesses are struggling to survive, hunger is rampant, and people across the country fear getting kicked out of their homes. The moment was similarly perilous exactly 12 years ago, when Mr. Biden was the vice president-elect and preparing to take office.
“I remember the utter terror,” said Cecilia Rouse, who was an economic adviser in the Obama White House and has been chosen to lead Mr. Biden’s Council of Economic Advisers.
The $900 billion pandemic relief plan that moderate lawmakers powered through Congress last month provides the incoming administration with some breathing room. This second tier of aid will deliver $600 stimulus checks, assist small businesses and extend federal unemployment benefits through mid-March.
down payment” — a brief bridge to get through a dark winter and not nearly enough to restore the economy’s health.
Roughly 19 million people are receiving some type of unemployment benefit, and many business owners wonder whether they will be able to survive the year. The coronavirus crisis has worsened longstanding inequalities, with workers at the lower end of the income spectrum — who are disproportionately Black and Hispanic — bearing the brunt of the pain.
At the same time, bottlenecks in the Covid-19 vaccines’ rollout as well as fears about a much more transmissible variant of the virus could further delay the revival of large swaths of the economy like restaurants, travel, live entertainment and sports.
“We are in for some choppy waters, even as we continue to get to the other side of the pandemic,” Ms. Rouse said.
Yet despite the scorched earth left by the coronavirus, the economy is on a more stable footing in several ways than it was at the start of 2009.
socked away money, lifting the savings rate to a 40-year high. In contrast, the Great Recession razed storehouses of wealth, in retirement accounts and homes, virtually overnight.
Jason Furman, who led President Barack Obama’s Council of Economic Advisers and is now an economist at Harvard University’s John F. Kennedy School of Government.
But if the Biden administration will have a bit more running room on the economy, it is likely to have a lot less politically than Mr. Obama did in the first two years of his presidency, when his party controlled both houses of Congress.
If the Democrats retake control of the Senate by winning both seats in the Georgia runoff election on Tuesday, Mr. Biden’s path will be much easier. Otherwise, the new president will have to deal with a Republican Senate led by Mitch McConnell of Kentucky, who has stymied legislation from the Democratic-controlled House.
In that case, the administration will have an uphill slog persuading lawmakers to approve more aid when this round ends. With a Democrat headed for the Oval Office, many Republicans who put aside their concerns about debt when it came to cutting taxes in 2017 have rediscovered their inner deficit hawk.
Mr. McConnell successfully resisted President Trump’s calls — echoed by Democrats — to increase the latest stimulus payments to $2,000 from $600.
The failure to extend or expand federal aid when it expires this spring not only would cause significant hardships and needless suffering but could seriously scar the economy, said Joseph Stiglitz, a Nobel Prize-winning economist.
unemployed for six months or longer have swelled to more than four million, increasing the chances that they may never find another job. Growing numbers of men and women are also dropping out of the labor force altogether.
None of those problems can really begin to be addressed without widely distributing the vaccines and reopening the schools so that parents, particularly mothers, can return to the work force.
That is why economists say that funneling direct aid to state and local governments is so crucial.
“That sector has been gutted,” said Abigail Wozniak, a labor economist at the Federal Reserve Bank of Minneapolis, but it “is the sector that allows all the other sectors to operate.”
States and localities will play a critical role in the vaccine rollout and in providing emergency medical personnel. They will also be responsible for sending teachers back to classrooms that are safe, and helping disadvantaged students regain lost ground.
red and blue states — and rural areas in particular — have lost revenues and public sector jobs.
lesson from the last recession: Failing to move quickly to provide sufficient money to the people and businesses that need it can damage the economy far into the future.
Brian Deese, whom Mr. Biden has picked to lead the National Economic Council, where he worked as an assistant during the Obama administration, said making public investments was necessary to ensure economic growth.
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