Paul Davidson , Bart Jansen
President-elect Joe Biden is set to unveil an all-star economic team Tuesday to tackle a darkening winter outlook as the USA struggles to dig out of the worst recession in a century.
Analysts expect stiff resistance from a split Congress whose Republicans are reluctant to further swell the massive deficit.
At the forefront of Biden’s team is former Federal Reserve Chair Janet Yellen, his pick for Treasury secretary. Other appointees include Neera Tanden, a former aide to Hillary Clinton and chief executive of the left-leaning think tank Center for American Progress, to head the Office of Management and Budget. Cecilia Rouse, dean of the Princeton School of Public and International Affairs, has been tapped to lead the Council of Economic Advisers.
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Biden deftly chose veteran Washington officials and policymakers left-of-center but not in the “progressive” camp led by Democratic Sens. Bernie Sanders and Elizabeth Warren, says Brian Gardner, chief Washington policy analyst at Stifel.
“They’re some experienced hands at high levels” of government, Gardner says.
In contrast to top economic officials in the Trump administration, Biden’s economic team “doesn’t look very corporate, does it?” says Alan Blinder, a Princeton University economist who served with Yellen on the Fed’s board in the 1990s.
The lineup is likely to push for a more aggressive economic blueprint than the Trump administration sought, including a robust COVID-19 relief package and ambitious proposals to upgrade the nation’s infrastructure, build a clean-energy economy and provide tuition-free community college. Biden wants to raise taxes on corporations and individuals earning more than $400,000.
The spending proposals would add to a deficit that has tripled to a record $3.1 trillion this year. Yellen, as well as the other appointees, have said that with borrowing costs are low and households and businesses suffering, now isn’t the time to whittle down the debt.
“In the near-term, there is clearly a need for more fiscal aid to act as a bridge to get us through this period,” says Maya MacGuineas, head of the Committee for a Responsible Federal Budget.
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Congress has been deadlocked for months over the relief package. House Democrats approved $2 trillion legislation that would provide more aid to millions of unemployed Americans, struggling small businesses and financially stressed states and cities. Senate Republicans pushed a $500 billion proposal. Two runoff races in Georgia will determine whether Republicans retain control of the Senate.
Even if Democrats win both races – giving the party technical control since Vice President-elect Kamala Harris would hold the deciding vote in a split Senate – Biden faces an uphill climb.
“It’s going to be a challenge for Yellen to work with the people in the Senate to get things done,” says Desmond Lachman, a resident fellow at the American Enterprise Institute who served as managing director and chief emerging market economic strategist at Salomon Smith Barney.
A divided Senate means Democrats won’t have close to a filibuster-proof majority of 60 votes. Gardner expects a limited COVID-19 relief measure of $500 billion to $1 trillion early next year, with more aid possible later. He’s not looking for any of Biden’s tax and spending plans to be passed. Dig Deeper You may also be interested in COVID-19 vaccine prospects may already be boosting consumer spending, economyWill gifts arrive in time for Christmas? Target, Macy’s, other stores offering same-day delivery for holiday rushCensorship or conspiracy theory? Trump supporters say Facebook and Twitter censor them but conservatives still rule social mediaFoldable tech is finally here. Will you bend towards it?The Daily Money: Subscribe to our newsletter
Blinder says the center-left troupe may be positioned to haggle with Republicans and push through a more expansive relief plan and some modest tax and spending initiatives. Some tax and spending measures could be tacked onto catch-all budget reconciliation bills, he says.
“There’s a chance,” he says.
Dean Baker, co-founder of the Center for Economic and Policy Research, suggests Biden’s more centrist economics team could horse-trade with Republicans on other bills. “You give me something and I’ll give you something,” he says.
Gardner says the Biden team’s best chance to enact his agenda is through executive actions and regulations. Besides drafting a budget, the Office of Management and Budget includes the Office of Information and Regulatory Affairs, which can temper rules passed by other agencies, Gardner says.
Yellen will have a big role in selecting the heads of regulatory agencies, such as the Securities and Exchange Commission, the Fed and the Office of Comptroller of the Currency, Gardner says.
The team faces a historic challenge.
The economy has recovered about 55% of the 22 million jobs lost in the spring, but monthly payroll gains have steadily slowed since peaking at 4.8 million in June, and recouping the rest could take several years, economists say. More than 130,000 businesses have closed for good, according to estimates by Yelp.
The coronavirus has surged to records, and states and localities are reinstating restrictions. Meanwhile, extended unemployment benefits and an eviction moratorium are among the federal aid set o expire at year’s end. J.P Morgan expects economic output to dip early next year, and others say there’s a risk the economy slips back into recession.
Here’s a look at the economics team:
The Treasury Department is central to Biden’s plans for stimulating the economy and recovering from the pandemic. Besides collecting taxes, Treasury handles international economic affairs, domestic finance, such as the debt and deficit, and financial crimes.
It plays a huge role in formulating economic policy. If confirmed, Yellen would succeed Treasury Secretary Steven Mnuchin, who led relief negotiations with Congress.
Beyond any immediate aid, Biden’s economic proposals call for overturning President Donald Trump’s tax cuts for corporations and for individuals earning more than $400,000 per year. Biden proposed to spend trillions of dollars to spur manufacturing, develop clean energy and support caregivers. Those proposals all rely on tax hikes that face difficult negotiations with Congress.
“If the Biden administration wants to change the tax code or think about debt and deficits, the Treasury secretary is enormously important in that process,” says Michael Strain, director of economic policy studies at AEI. ”
Yellen would be the first woman to lead the Treasury Department. She was also the first to lead the Fed and served as chair of the Council of Economic Advisers under President Bill Clinton.
Lachman says the markets reacted favorably to Yellen because of her experience. Yellen, who has advocated for more coronavirus relief to recover from the recession, takes a more moderate approach to keeping deficits under control than a liberal alternative such as Sen. Warren, D-Mass., who supported large increases in spending on health care and education.
“She is hugely qualified. She’s a very safe pair of hands,” Lachman says of Yellen. “She’s not on the progressive side of the party. She’s unlikely to go along with things that don’t make economic sense.”
Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, says she’ll “get a favorable view” in the confirmation process although senators must still consider background documents she’ll provide.
Yellen is likely to support more coronavirus aid than Mnuchin. Lachman says a bigger change may be abroad, where she is expected to cooperate with international partners, rather than applying tariffs to imports from allies such as Canada and Germany.
“Her intelligence, tenacity and calm approach make Janet a trailblazer for women everywhere,” Christine Lagarde, president of the European Central Bank, tweeted in her congratulations to Yellen. “I look forward to tackling yet again the global economic challenges we are facing, together.”
Yellen served as the Fed’s vice chair from 2010 to 2014, after a term on the Federal Reserve Board of Governors and as president of the Federal Reserve Bank of San Francisco. She has been a faculty member at the University of California-Berkeley for 40 years after earning a bachelor’s degree at Brown University and a doctorate in economics from Yale University.
Wally Adeyemo, president of the Obama Foundation, would become the first Black person to serve as deputy secretary of Treasury. During the Obama administration, he served as deputy director of the National Economic Council, deputy national security advisor, as the first chief of staff of the Consumer Financial Protection Bureau and as deputy chief of staff at Treasury.
Before and after his service in the Obama administration, he advised a range of nonprofit and private organizations, including the Center for Strategic & International Studies. Adeyemo, who was born in Nigeria and raised in California, earned a bachelor’s degree from the University of California-Berkeley and his law degree from Yale Law School.
Tanden would be the first woman and person of Southeast Asian descent to lead the Office of Management and Budget, which not only maps the president’s spending blueprint but also serves as a gatekeeper by reviewing government regulations for their financial impact.
Tanden was a senior adviser in the Clinton administration, and she worked for Sen. Hillary Clinton, D-N.Y., before serving as political director for her 2008 presidential campaign. Tanden served as director of domestic policy for President Barack Obama’s campaign.
Sen. Rick Scott, R-Fla., tweeted Monday that “Neera Tanden is a big-government, big-spending radical liberal who’s a terrible choice for OMB Director.”
Drew Brandewie, a spokesman for Sen. John Cornyn, R-Texas, tweeted Sunday that Tanden has “zero chance of being confirmed” because of disparaging tweets against Republicans.
At the Center for American Progress and in previous administrations, Tanden advocated for policies designed to support working families, foster broad-based economic growth and curb inequality. Her family relied on food stamps and Section 8 subsidized housing when she was a child. She earned a bachelor’s degree from the University of California-Los Angeles and a law degree from Yale.
Rouse, a labor economist at Princeton, would become the first Black person to lead the Council of Economic Advisers after serving on the panel during the Obama administration. She was on the National Economic Council during the Clinton administration.
The role of the Council of Economic Advisers varies between administrations. The three-member panel keeps the White House updated on the state of the economy and provides economic analysis of issues such as changing the tax code or rolling out regulations to mitigate climate change.
“They will do expert economic analysis to figure out what the effects of the policy changes will be on the economy,” Strain says.
He suggests as the economy faces slow growth, declining workforce participation and lackluster education, skills and training systems, Rouse will be in a unique position to keep those items on the White House radar.
Rouse’s expertise focused on the economics of education and equality. She joined the Princeton faculty in 1992 after receiving a bachelor’s degree and a doctorate in economics from Harvard University.
Bernstein would become a member of the Council of Economic Advisers. Bernstein served as chief economist to Biden when he was vice president before joining the Center on Budget and Policy Priorities as a senior fellow. He was executive director of the White House task force on the middle class.
Bernstein testified in July before the Joint Economic Committee, urging fiscal relief as $600 weekly unemployment payments ended and millions remained jobless. He argued that shortchanging temporary relief over deficit concerns during a period of low interest rates would be “highly misguided.”
“By working together to quickly implement significant fiscal relief in these and other areas, Congress can once again throw struggling people, places and businesses the lifeline they need to make it to the other side of this crisis,” Bernstein said.
Bernstein served as a senior economist and director of the Living Standards Program at the Economic Policy Institute and as the deputy chief economist at the Labor Department during the Clinton administration.
Bernstein is a former social worker who advocated policies to expand opportunities for working Americans. He earned a bachelor’s degree from the Manhattan School of Music, a master’s degree in social work from Hunter College and a doctorate in social welfare from Columbia University.
Boushey, a longtime economic counselor to Biden, would become a member of the Council of Economic Advisers. Boushey focused on economic inequality as CEO of the Washington Center for Equitable Growth, which describes itself as “a nonprofit research and grantmaking organization dedicated to advancing evidence-backed ideas and policies that promote strong, stable and broad-based economic growth.”
Boushey wrote in the journal Democracy last year that the financial meltdown and Great Recession in 2007 were neither predicted nor solved by traditional economists. She argued that economic inequality is “undermining long-held theories about the so-called natural laws of economics.”
Boushey was chief economist for Secretary of State Hillary Clinton. She served as an economist for the Center for American Progress, the Joint Economic Committee of the U.S. Congress, the Center for Economic and Policy Research and the Economic Policy Institute.
She received her bachelor’s degree from Hampshire College and a doctorate in economics from the New School for Social Research.