How Obama-era Stimulus Failures Could Guide a Biden Administration

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“We have much better tools to curb growth that is too fast than we have the tools to stimulate an economy that is too weak,” said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution and former chief economist at the Congressional Budget. Office. “Once our economy enters a scenario of slow growth and crushing, it’s very difficult to change course.”

At the same time, a sharp drop in interest rates even as budget deficits have grown has led many centrist and left-wing economists to worry less about debt than they did during the Obama years. And Republican support for a $ 1.5 trillion tax cut in 2017 and a $ 2.2 trillion pandemic relief bill last spring helped lessen the sticker shock over 13-digit cost estimates.

Ms Edelberg this month published an article with Louise Sheiner estimating that $ 2 trillion in fiscal stimulus would return the economy to its pre-pandemic growth path by the third quarter of 2021. In the absence of any action , they estimate, it could take as long as a decade.

Mr Biden cited his work on the 2009 Stimulus Bill, boasting of its fraud prevention work and the role the Stimulus Act played in supporting state and local governments and clean energy. . Discussing his 2021 agenda, he pledged “the types of investments that will stimulate the economy” and “to quickly regain full employment and help rebuild better than before”.

Those who advise him say he is aware of historical echoes.

“Joe Biden doesn’t want to take office and sit on a sloppy economy for four, six, eight quarters,” said Jared Bernstein, who advised Biden during his vice-presidency and now does. “If he gets the chance, I suspect there will be a real motivation to do it deeply, effectively and quickly.”

In particular, Mr Bernstein said, a Biden administration would seek “high multiplier” policies that channel money to the people and businesses that need it and are likely to spend it, thereby helping funds flow quickly through. the economy to fuel growth.

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