Challenges Joe Biden faces in righting the economy

President-elect Joe Biden. Photo / AP

All presidents come into office vowing to rapidly put into effect an ambitious agenda. But for Joe Biden, the raging coronavirus pandemic and the economic pain it is causing mean many things must get done quickly if he wants to get the economy going. In a speech Thursday on his US$1.9 trillion ($2.6t) spending proposal, Biden repeatedly stressed the need to act "now."

But piecing together a majority in Congress could take time: Compromises and concessions will be needed to get the votes he will need to advance legislation.

The new president is expected to reverse many of Donald Trump's policies that undid those of the Obama administration in which Biden was vice president. But in some areas crucial to business — like trade relations with China and the European Union — he probably will not return the United States to the pre-Trump order. Nor is he likely to back off from the Trump administration's efforts to curb the power of large technology firms.

Here are some policy areas that will demand Biden's attention, and determine the success of his presidency:

Fixing the economy

Twelve years ago, President Barack Obama inherited an economy in free-fall. Biden has better luck: The economy has rebounded significantly from the collapse last spring, in large part because of trillions of dollars in federal aid. Progress has slowed in recent months, however, and in December, it went into reverse as employers cut jobs in the face of the resurgent pandemic.

Biden's first job will be to right the ship, something he proposes to do via a US$1.9t spending plan he announced last week. Once the immediate crisis passes, Biden will face a perhaps even more difficult set of challenges: healing the scars that the pandemic has left on families and communities, and addressing the deep-seated issues of inequality that have existed for decades but that the pandemic laid bare.

Tackling Big Tech

The recent decisions by Facebook, Twitter and other technology companies to cut off Trump and right-wing groups sharply escalated the debate over online speech and the influence of Silicon Valley.

At the center of the debate is a law known as Section 230, which absolved websites of legal responsibility for the content they host. Republicans and some Democrats are calling to revise or revoke the law, while the powerful tech companies will probably resist major changes. The Biden administration also inherits the federal government's antitrust lawsuits against Google and Facebook, and a Congress that continues to scrutinise the industry's might.

Rethinking taxes

Biden has repeatedly declared that the federal tax code favours the rich and large corporations, and has proposed several measures to make them pay more, to finance spending on clean energy, infrastructure, education and other parts of his domestic agenda. He wants to roll back some of Trump's 2017 tax cuts for people earning more than US$400,000, and to raise rates on companies, high-earning investors and heirs to large fortunes. Biden will need to overcome resistance from business lobbyists and square his proposals with competing plans from top congressional Democrats, who also want to raise taxes on corporations and the rich, but often differ with Biden on how.

Countering China

China has emerged from the pandemic even stronger, presenting a more formidable US economic rival. Exports to the United States are surging despite Trump's tariffs. After years of heavy investment in worker training and automation, China's manufacturing sector has proved highly competitive.

Trump's export restrictions and the troubles of the Boeing 737 Max have depressed China's imports of high-value manufactured goods from the United States, mainly semiconductors and aircraft. China's rapidly rising military might and growing willingness to confront nearby democracies will present the Biden administration with a tough choice of whether to allow more tech sales that may make China even stronger.

Will the Biden administration allow more tech sales that may make China even stronger. Photo / AP

Reassessing trade

The Biden administration has laid out ambitious goals for revitalising American industry and working with allies to counter China. It faces the immediate challenge of deciding what to do about many of Trump's trade actions, including tariffs on more than US$360 billion of Chinese products and the resulting trade deal that locks China into buying hundreds of billions of dollars in American products. And it also must figure out how to soothe allies like Europe that were rankled by Trump's aggressive trade approach.

Overseeing finance

Biden has promised stricter oversight of the financial system. Among his priorities: undoing the Trump administration's rollbacks of rules governing risk-taking by banks and harmful practices like payday lending, and reining in activity by nonbank financial technology firms.

Biden's team also will have to tackle the unregulated "shadow banking" system of hedge funds, private equity firms and money managers, holding trillions of dollars, that have the potential to cause enormous market turmoil. More broadly, his ambitions to close the racial wealth gap and fight climate change are likely to influence his approach to regulating finance.

Helping small business

Small companies employ roughly half of America's nongovernment workers, and an estimated 400,000 have permanently closed since the pandemic took hold.

Biden has called for US$15b in direct grants to at least 1 million of the hardest-hit small businesses — that would be to up to US$15,000 per recipient — and a US$35b federal investment in state and local financing programs. He is also seeking 14 weeks of paid caregiving and sick leave for workers during the coronavirus crisis, with the government footing the bill for organisations with fewer than 500 employees.

Easing household debt

Overall household debt has dropped during the pandemic, but job losses have thrown millions of families into poverty. In addition to checks of US$1,400 per person and expanded unemployment benefits, Biden is seeking US$30b to help struggling households catch up on overdue rent, water and energy bills. He also proposed a US$15-an-hour minimum wage.

Biden plans to extend the moratorium on federal student loan payments; he has not yet said for how long. While Biden supports eliminating US$10,000 per person in federal student debt, he did not include that in his American Rescue Plan. Progressives in Congress may insist on its inclusion in any stimulus package.

Biden is seeking US$30b to help struggling households catch up on overdue rent, water and energy bills. Photo / 123RF

Reimagining energy

Biden's goal of a carbon-free electricity system by 2035 will require a radical overhaul of the energy industry requiring hundreds of billions of dollars in investment as well as new policies, such as fortifying the grid in states like California. Some critics have argued that the goal is not achievable.

A big shift to renewable energy and electric vehicles will slash demand for oil, gas and coal, threatening some businesses. It could also lead to job losses, because people trained to work with fossil fuels might not have the skills that renewable-energy jobs require.

Repairing transportation

The transportation sector has received billions in federal aid but is still reeling from the pandemic. The Biden administration will have to decide whether to do more to help it, including offering more financial support and requiring travelers to wear masks.

Biden's promise to repair and expand the nation's highways, railroads, transit systems and other infrastructure is also a priority for businesses. The transportation sector is a major contributor to climate change, which Biden has pledged to tackle aggressively. Doing so without causing huge job losses will be a big challenge.

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