President Biden faces a tough challenge: The COVID-19 recession permanently downsized whole swaths of the economy.
Work from home and enhanced digital platforms are forcing waiters, airline pilots, many brick and mortar executives and supporting professionals into job markets that pay less for their skills or offer no employment at all. Store fronts, aircraft and office buildings must be scrapped or repurposed at significant cost.
Traditional fiscal policy — tax cuts and stimulus payments — can’t rescue those people and assets.
The Federal Reserve is hostage to easy money policies. Municipalities and businesses, often with questionable credit ratings, are feasting on cheap debt to survive and lack credible plans to right their finances.
Last year, Tesla sold nearly 500,000 electric vehicles. After years of promising competitive EVs, Ford was still promising, and its bonds have been downgraded to junk status.
If the Fed raises interest rates as unemployment falls, it would instigate business failures that push high-tax local governments into budget crises that instigate self-defeating cycles of even higher taxes, business and middle class flight, more empty offices and store fronts and decaying transit systems and schools.
If the Fed continues to enable foreign borrowing to finance companies and cities at rock bottom rates, profligate borrowing will erode the international confidence in the dollar. That’s how countries have debt crises and end up under the financial control of others.
Firing up growth requires social, labor market and industrial policies that would rile progressives who marionette the Biden administration. And unsettle moderate Republicans in Congress who fear primary challenges from the hard right if they back regulations and bigger deficits to finance what’s needed.
During the Trump years, poverty dropped sharply. The wealth of Hispanics, Blacks and the bottom half of the households overall increased 65%, 33% and 35% — Whites and the upper half of families each gained about 3%.
Mr. Biden’s campaign rhetoric notwithstanding, the Trump economy worked for everyone and now the new president must deliver more than the 2% growth of Bush and Obama recoveries.
Near term, promoting more business-based training programs and a skills-based immigration policy would drive high tech growth, enable innovation generally and create jobs in new locations for the sandwich makers, accountants and other service providers displaced from New York’s and California’s collapsing civil fabrics.
That includes enhanced unemployment benefits linked to reskilling programs, making social benefits like housing subsidies transferrable across state lines and federal funding for relocation stipends — all would be unsettling for Republicans. And rethinking the thicket of state licensing requirements that impeded interstate mobility of skilled professionals and technicians — that would upset Mr. Biden’s union constituencies.
Longer term, progress requires repurposing high schools toward digital trades and raising the U.S. birth rate — now at 1.71% — to sustain our labor force and support for the elderly. Conversations about how families and workplaces are structured reach deeply into personal choices and private business practices that feminist theologians like to dictate, and conservatives shun with nostalgia for a patriarchal utopia that only ever really existed on the MGM backlot.
If I raise this issue on a speaking engagement, I am not invited back — the cancel culture is open source and destructive to our civilization.
Along with better skilled and sustainable labor force, greater investments in infrastructure and intellectual capital are needed. For decades, federal support for R&D has been declining, while China offers more subsidies to technology champions.
Allocating funds to R&D is easy — if the Federal Reserve can print money for stimulus checks, it can print money to build better roads and finance university and industry research — but spending effectively is another matter.
During the Obama administration, industrial policy — as epitomized by high speed rail and Solyndra — posted a discouraging record.
Mr. Biden’s choices for his economic team were driven through climate change, anti-business and race and gender screens — preoccupations better assigned to historians of the 20th century.
American utilities are racing to build wind, solar and battery storage, and GM is striving to catch up with Elon Musk.
Surging stock prices are making capital terribly cheap for green businesses.
Mr. Biden’s chairman of the Council of Economic Advisers endlessly obsesses about discrimination against women in orchestra auditions a generation ago — such prejudices repeat throughout his economic team. That distracts from the real sources and solutions for our problems.
A lifetime shuttling among think tanks, academia and government agencies makes the world outside appear corrupt and exploitive when it is the culture inside the bubble that is decadent and impedes progress.
• Peter Morici, @pmorici1, is an economist and emeritus business professor at the University of Maryland, and a national columnist.
Now Biden has to match Trump’s economic record – Washington Times