Biden – whose Gallup approval rating fell to 50% this week, its lowest yet – is already attracting attacks from Republicans on the matter. Representative Kevin Brady of Texas, the GOP’s top tax drafter in Congress, said the president had focused too much on his “$ 4 trillion spending spree” and not enough on the virus.
Jason Furman, a former senior economic adviser to President Barack Obama and close to the current White House economics team, said the West Wing was keenly aware of the risks to the economy from the surge in Covid cases.
“Any problem that has a 5-10% chance of derailing the economic recovery that you are looking very closely at and worrying about,” Furman said.
However, he said the concern was not particularly high, because even in “the most plausible worst-case scenario” the risk is that the Delta variant “would take what was a very quick recovery and turn it into a rapid recovery ”.
Another person familiar with the economics team’s discussions confirmed that the White House is very careful but does not view the virus as a significant threat. Biden called on Americans to get vaccinated, primarily for the sake of people’s safety, but also for the sake of the economy, the person said.
Biden, speaking on Monday after the stock market fell as investors braced for a potential rebound from the virus, said: “We can’t give up, especially because of the Delta variant, which is more transmissible and longer. dangerous. “
Coronavirus cases have increased across the country and are back to their highest level since early May as the highly contagious variant spreads across the country. The sharp rise has rekindled fears of the pandemic, especially as cases increase in young children who cannot get vaccinated and even in those who have been fully vaccinated.
“If people don’t feel safe, they will close schools. If people don’t feel safe, they won’t go back to work, ”said Claudia Sahm, former Federal Reserve economist. “The recovery is progressing, but it is still vulnerable. “
While it is far too early to assess the fallout from the increase in cases, any employment slowdown caused by Delta is likely to be more pronounced in the Blue States, where higher percentages of residents are vaccinated but where people are also less willing to take risks as coronavirus cases increase. A CBS News poll this week showed that nearly 3 in 4 fully vaccinated Americans are worried about the Delta variant, compared with less than half of those who are not fully vaccinated or have not received any vaccines.
These same Democratic-ruled states also have the most jobs to recover as they initially put in place stricter shutdown orders, then reopened more slowly. About 8 million of the 10 million jobs the economy still lacked before the pandemic are in blue states, said Arindrajit Dube, a labor economist at the University of Massachusetts at Amherst.
The slowdown in job growth is therefore likely to be most acute in states where the need is greatest. And given the economic activity generated by these states, the spillover effects on the macroeconomics will be more serious.
“If you have heavily populated areas of the country that have taken Covid seriously all the time, and these people are scared, then you have at least a noticeable slowdown in the recovery,” said Sahm, now a senior researcher at Jain Family. Institute. .
If Delta continues to spread, the economic shock will come as huge groups of Americans still struggle to get back on their feet.
As wages have risen, especially for low-income workers in recreation and hospitality, these gains have been overtaken by inflation. And more than one in 3 American adults have less emergency savings now than before the pandemic, despite the more than $ 5,000 billion Congress has pumped into the economy since March 2020 in stimulus funds. and relief, according to a Bankrate.com survey released Wednesday.
“It really highlights how much we need to restore jobs,” said Diane Swonk, chief economist at Grant Thornton. “All these problems that really plague low-income households have not gone away. We’ve bought some time, but the clock is running out.
The end of various social safety net programs will affect tens of millions of Americans. Census Bureau survey data shows 3.6 million households say they are somewhat or very likely to be evicted in the next two months, as the national moratorium expires at the end of July. More than 12 million Americans continue to receive some form of unemployment benefits, which will be fully reduced or eliminated by Labor Day.
And some 42 million student loan borrowers will have to resume their payments in October unless the Biden administration takes action – and 2 in 3 say it will be hard for them to foot the bill, a Pew Charitable Trusts survey found this month. this month.
The ultimate risk is that these and other programs run out as a major coronavirus outbreak results in lower economic spending, slower hiring, or increased reluctance to find work for fear of catching the virus. .
“If we are to see a big wave at the end of the summer, at the beginning of the fall, we will probably see an environment in which the economic impact will be much greater if there is no tax support additional, ”said Gregory Daco, Chief US Economist at Oxford Economics.
Congress has been concerned in recent months not with short-term stimulus measures but with longer-term initiatives, namely a bipartisan infrastructure plan and a multibillion-dollar spending program for child care. children, health care, education and the climate, said Daco. Soon, too, lawmakers will also need to take action on urgent issues, including the budget and the debt ceiling.
“These are probably the main goals,” he said. “So there could be a significant mismatch between the potential need for additional fiscal stimulus and Congress’ emphasis on more medium-term plans. “
In the meantime, the Delta variant gives Republicans new ammunition to speak out against the multibillion-dollar spending program that they have long called an expensive Democratic wishlist. Brady, the ranked Republican on the House Ways and Means Committee, said on Tuesday that he hoped the president “would now turn away from his distraction on another $ 4 trillion spending spree” to turn himself around. focus on the coronavirus and the economy.
“I’m afraid that almost from day one, six months ago, [Biden] has stopped beating the virus and rebuilding the economy, ”Brady said. “The president is now scrambling to make up for this lack of attention, but I fear it is too late. “