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Biden-voting counties equal 70% of America’s economy. What does this mean for the nation’s political-economic divide? – Brookings Institution

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Even with a new president and political party soon in charge of the White House, the nation’s economic standoff continues. Notwithstanding President-elect Joe Biden’s solid popular vote victory, last week’s election failed to deliver the kind of transformative reorientation of the nation’s political-economic map that Democrats (and some Republicans) had hoped for. The data confirms that the election sharpened the striking geographic divide between red and blue America, instead of dispelling it.

Most notably, the stark economic rift that Brookings Metro documented after Donald Trump’s shocking 2016 victory has grown even wider. In 2016, we wrote that the 2,584 counties that Trump won generated just 36% of the country’s economic output, whereas the 472 counties Hillary Clinton carried equated to almost two-thirds of the nation’s aggregate economy.

A similar analysis for last week’s election shows these trends continuing, albeit with a different political outcome. This time, Biden’s winning base in 477 counties encompasses fully 70% of America’s economic activity, while Trump’s losing base of 2,497 counties represents just 29% of the economy. (Votes are still outstanding in 110 mostly low-output counties, and this piece will be updated as new data is reported.)

Table 1. Candidates’ counties won and share of GDP in 2016 and 2020

Year Candidate Counties won Total votes Aggregate share of US GDP
2016 Hillary Clinton 472 65,853,625 64%
Donald Trump 2,584 62,985,106 36%
2020 Joe Biden 477 75,602,458 70%
Donald Trump 2,497 71,216,709 29%

Note: 2020 figures reflect unofficial results from 96% of counties

Source: Brookings analysis of data from the Bureau of Economic Analysis, Dave Leip’s Atlas of U.S. Presidential Elections, The New York Times, and Moody’s Analytics

1

So, while the election’s winner may have changed, the nation’s economic geography remains rigidly divided. Biden captured virtually all of the counties with the biggest economies in the country (depicted by the largest blue tiles in the nearby graphic), including flipping the few that Clinton did not win in 2016.

By contrast, Trump won thousands of counties in small-town and rural communities with correspondingly tiny economies (depicted by the red tiles). Biden’s counties tended to be far more diverse, educated, and white-collar professional, with their aggregate nonwhite and college-educated shares of the economy running to 35% and 36%, respectively, compared to 16% and 25% in counties that voted for Trump.

In short, 2020’s map continues to reflect a striking split between the large, dense, metropolitan counties that voted Democratic and the mostly exurban, small-town, or rural counties that voted Republican.  Blue and red America reflect two very different economies: one oriented to diverse, often college-educated workers in professional and digital services occupations, and the other whiter, less-educated, and more dependent on “traditional” industries.

With that said, it would be wrong to describe this as a completely static map. While the metropolitan/ nonmetropolitan dichotomy remained starkly persistent, 2020 election returns produced nontrivial movement, as Biden added modestly to the Democrats’ metropolitan base and significantly to its vote base. Most notably, Biden flipped seven of the nation’s 100 highest-output counties, strengthening the link between these core economic hubs and the Democratic Party. More specifically, Biden flipped half of the 10 most economically significant counties Trump won in 2016, including Phoenix’s Maricopa County; Dallas-Fort Worth’s Tarrant County; Jacksonville, Fla.’s Duval County; Morris County in New Jersey; and Tampa-St. Petersburg, Fla.’s Pinellas County.

Altogether, those losses shaved about 3 percentage points’ worth of GDP off the economic base of Trump counties. That reduced the share of the nation’s GDP produced by Republican-voting counties to a new low in recent times.

Why does this matter? This economic rift that persists in dividing the nation is a problem because it underscores the near-certainty of both continued clashes between the political parties and continued alienation and misunderstandings.

To start with, the 2020’s sharpened economic divide forecasts gridlock in Congress and between the White House and Senate on the most important issues of economic policy. The problem—as we have witnessed over the past decade and are likely to continue seeing—is not only that Democrats and Republicans disagree on issues of culture, identity, and power, but that they represent radically different swaths of the economy. Democrats represent voters who overwhelmingly reside in the nation’s diverse economic centers, and thus tend to prioritize housing affordability, an improved social safety net, transportation infrastructure, and racial justice. Jobs in blue America also disproportionately rely on national R&D investment, technology leadership, and services exports.

By contrast, Republicans represent an economic base situated in the nation’s struggling small towns and rural areas. Prosperity there remains out of reach for many, and the party sees no reason to consider the priorities and needs of the nation’s metropolitan centers. That is not a scenario for economic consensus or achievement.

At the same time, the results from last week’s election likely underscore fundamental problems of economic alienation and estrangement. Specifically, Trump’s anti-establishment appeal suggests that a sizable portion of the country continues to feel little connection to the nation’s core economic enterprises, and chose to channel that animosity into a candidate who promised not to build up all parts of the country, but rather to vilify groups who didn’t resemble his base.

If this pattern continues—with one party aiming to confront the challenges at top of mind for a majority of Americans, and the other continuing to stoke the hostility and indignation held by a significant minority—it will be a recipe not only for more gridlock and ineffective governance, but also for economic harm to nearly all people and places. In light of the desperate need for a broad, historic recovery from the economic damage of the COVID-19 pandemic, a continuation of the patterns we’ve seen play out over the past decade would be a particularly unsustainable situation for Americans in communities of all sizes.

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There can be no plan for the economy without a vaccine distribution plan: O'Toole – CBC.ca

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Conservative Leader Erin O’Toole dismissed the federal government’s fall economic statement saying a three-year plan to provide stimulus to the economy is pointless without first revealing how Canadians will be vaccinated against COVID-19.

“The minister of finance has proven their government has no plan. Without a plan for vaccines, there can be no long-term plan for our economy,” O’Toole said in the House of Commons on Monday. 

Deputy Prime Minister and Finance Minister Chrystia Freeland responded that enough vaccine has been prepurchased to ensure there are up to 10 doses for every Canadian, but she did not provide details on how vaccines will be rolled out in Canada. 

“We don’t know the first date vaccines will be received. Almost, most of our allies do, in fact the U.K. and the U.S. will start receiving them in the next few days. Canadians are going to be asking questions and they deserve answers,” O’Toole later told CBC News Network’s Power & Politics

“This is a debacle,” he told host Vassy Kapelos. “We’re pushing because there is a real problem here.”

WATCH | O’Toole pushes for vaccine plan:

Opposition Leader Erin O’Toole says the government needs to present a clear plan for distributing vaccines to Canadians. 1:27

O’Toole also said the government’s efforts to provide economic support to both companies and individuals could have been more effective if implemented sooner. 

“The truth is the Liberals’ economic response has been erratic and confused. Millions more Canadians were put on the CERB than necessary when their jobs could have been maintained if the Liberals had implemented a wage subsidy earlier,” he said. 

In Monday’s fiscal update Freeland projects that the deficit will reach $381.6 billion by the end of March 2021 and could climb higher, depending on the rate of COVID-19 infections.

The Liberal government said it is preparing to spend up to $100 billion to kick-start the post-pandemic economy over the next three years, promising it would provide details in the coming months. 

Bloc Québécois Leader Yves-François Blanchet said there should be much more detail about the government’s plan to provide economic stimulus, especially when the government is so deeply in debt. 

“They have renounced the very idea of controlling deficits,” Blanchet said. “They basically say there is no limit to what they will spend without saying, or without admitting, how badly sometimes they do spend it.”

WATCH | O’Toole claims government’s slow response led to job losses:

Reacting to the federal government’s Fall Economic Statement, Opposition Leader Erin O’Toole says the government’s slow response to the economic downturn caused by the COVID-19 pandemic has caused thousands of job losses. 1:43

NDP finance critic Peter Julian told the House of Commons that the economic statement should be a signal to Canadians that “austerity is coming.” 

Leader Jagmeet Singh was later asked by Kapelos to clarify that position. He said the government’s plan to reduce supports as the economy recovers is evidence Canadians should be concerned. 

“If you look at their economic update in the next years, past Year Two and Three, we see clearly cuts to the help that people need,” Singh told Kapelos. 

Singh was particularly critical of the Liberal government’s decision to put off directly taxing web giants such as Amazon and Google until 2022, while starting to collect GST/HST on goods and services provided by foreign-based digital companies.

Watch: NDP Leader Singh says Fall Economic Statement shows future ‘cuts to the help that people need’

Reacting to the Fall Economic Statement, NDP Leader Jagmeet Singh says the government should be more focused on generating revenue from wealthy individuals and corporations so that it can continue to invest in helping people in a sustained way 4:18

Singh said the application of the GST was important because it put Canadian companies on an even footing with foreign companies, but was meaningless because it failed to directly tax those corporations. 

“Why is it, six years into their government, they still have not actually made web giants pay a single, effectively a cent, of corporate tax? Actually revenue-based taxes that they make off of Canadians in Canada?” he asked Kapelos. 

Singh said he wanted to see a wealth tax that targets people that have more than $20 million and also “pandemic profiteering taxes” levied on companies that have “made massive profits off the backs of Canadians,” during the pandemic. 

Green Party Leader Annamie Paul welcomed some of the environmental initiatives in the economic statement, particularly issues that help the federal government achieve its net-zero objective. 

“There are also enhanced investments in the infrastructure, projects and those sectors which will move us toward net-zero by helping to reduce Canada’s greenhouse gas emissions,” she said. 

However she criticized the failure to deliver a plan that would see emissions cut by 60 per cent from 2005 levels or the implementation of a carbon budget setting out the maximum level of emissions Canada can emit and still keep global temperatures from rising.

Watch: Green Party leader says Liberal government is delaying many initiatives past the next election

Federal Green Party Leader Annamie Paul spoke with reporters after the fiscal update on Monday. 1:04

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Fall Economic Statement: Seven takeaways for Canada's innovation economy – The Logic

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The federal government tabled its Fall Economic Statement (FES) on Monday, proposing $100 billion in stimulus spending over the next three fiscal years, hoping to create one million jobs and drive an “accelerated economic recovery.”

The FES claims Canada’s economy would look a lot worse without the Liberals’ interventions since the start of the COVID-19 pandemic. The finance department estimates that without federal subsidy, credit and benefit programs, real GDP would have been 4.6 per cent lower this year and 4.4 per cent lower in 2021. 

That’s part of the rationale for the government’s continued spending. “This crisis demands targeted, time-limited support to keep people and businesses afloat and to build our way out of the COVID-19 recession,” said the prepared text of a speech Finance Minister Chrystia Freeland will deliver in the House of Commons Monday afternoon. So the FES doesn’t set a new maximum deficit or debt target, instead promising that the government will start to wind down its stimulus measures based on indicators like employment levels and hours worked. This year, Ottawa will run a $381.6-billion deficit, with spending exceeding revenues by $121.2 billion next fiscal year.

For Canada’s innovators and small- and medium-sized businesses, the government unveiled some key policies, with details on changes to how stock options will be taxed, an extension of wage and rent subsidies, and another step towards a digital-services tax. Here are seven ways the economic statement will affect the innovation economy.

Stock options

What: Employees will be taxed at the capital-gains rate for the first $200,000 worth of shares for which they exercise stock options each year; anything above that amount will be taxed at the regular personal-taxation rate—the share of income individuals typically owe, based on their tax bracket.    

How much: The government expects to collect an additional $200 million annually from the change. 

The fine print: The cap will apply to options granted from July 1, 2021 onwards. The government has long promised the measure won’t hurt startups and fast-growing businesses, which the FES notes use options “as a tool for attracting and retaining talent.” It won’t apply to firms with annual gross revenues of $500 million or less. The changes will also exempt Canadian-controlled private corporations: firms incorporated in the country and majority-controlled by residents. Innovation-economy companies often use the structure, which helps them qualify for the highest rates under the federal scientific research and experimental development tax credit. 

The context: The Liberals first proposed a stock-option cap during the 2015 federal election, but backed off the plan the following spring, after opposition from tech executives. The government revived the measure in the 2019 budget, promising this time to exempt “start-ups and rapidly growing Canadian businesses.” Innovation-economy executives expressed concern about how Ottawa would design the carve-out, and the size of the cap. A “reasonable number” for the annual limit would be “into the millions before you get taxed,” Sachin Aggarwal, CEO of Toronto-based health-care technology firm Think Research, told The Logic in October 2019. He also called for provisions allowing employees to be able to defer the amounts they owe. Startup staff don’t typically sell their shares until the company exits, so they don’t necessarily have the cash on hand to pay the tax agency, even if exercising their options makes them look wealthier on paper. The FES does not include such provisions. 

The bottom line: Employees at many startups, scale-ups and fast-growing firms will indeed be exempted from the new cap, assuaging executives’ fears that the measure would hurt their ability to recruit and keep skilled workers. But staff at some of the country’s biggest tech companies will have to pay more tax on new options—Shopify, BlackBerry, and Ceridian all had more than $500 million in revenue last fiscal year.

The response: “You can’t tax your way to prosperity, so it’s good to see the government has listened to the leaders of Canada’s high-growth tech sector and understands that stock options are used for talent attraction and retention, and should be kept as competitive as possible,” said Benjamin Bergen, executive director of the Council of Canadian Innovators, a lobby group for scale-up firms.

***

Canada Emergency Wage Subsidy

What: The maximum subsidy rate for the Canada Emergency Wage Subsidy (CEWS) program will increase from 65 per cent to 75 per cent starting December 20, all the way to March 13, 2021. The program had started with a maximum subsidy of 75 per cent, before being scaled down in July. The revenue-drop test for program eligibility will now be the same for both the base amount and the top-up amount (a change in an eligible employer’s monthly revenues year over year, or compared to the average of January and February 2020 revenues). 

How much: The increase to this subsidy alone is expected to cost the government $14.8 billion. The feds have already dispensed over $50 billion to businesses in CEWS payments to date, and the economic statement estimates a total of $83.5 billion in spending on wage subsidies in 2020. 

The fine print: Although the government did not provide an estimate of how many businesses it expected to apply for the CEWS in 2021, it did disclose a provisional estimate for combined spending on the Canada Emergency Rent Subsidy (CERS) and CEWS for the period of April to June 2021, which it expects will exceed $16 billion. It estimated that over 3.9 million Canadian workers have been supported by the CEWS to date. 

The context: The CEWS faced some criticism from businesses when it was first introduced because eligible employers were required to have had a 30 per cent revenue decline in any four-week period in which it applied, in order to qualify for what was a 75 per cent subsidy at the time. Tech companies, in particular, argued that revenue losses were not an adequate measure of decrease in business activity, suggesting that the government consider other variables to measure the impact of the pandemic, like declines in billable hours, units shipped, gross bookings or subscriptions. Under new legislation that was ratified in November, any business with a revenue decline would be eligible—the subsidy, however, would still be proportional to revenue losses, but capped at a maximum of 65 per cent. The CEWS is currently set to expire in June 2021, and the economic statement offered no indication the deadline would be extended.

The response: While it welcomed the 75 per cent boost to CEWS, the Canadian Federation for Independent Business (CFIB) noted that when the program was first introduced, firms that had just a 30 per cent revenue loss were eligible for a maximum wage subsidy of 75 per cent. Under the proposed new rules, businesses would need a 70 per cent revenue collapse to qualify. “It is disappointing that the government has not announced further fixes for new businesses and self-employed Canadians, who remain ineligible for nearly all of the key support program,” said CFIB CEO Dan Kelly in a statement.

***

What’s in the FES for small businesses

  • The maximum CEWS subsidy rate will increase from 65 per cent to 75 per cent, starting December 20. 
  • The maximum cap of 65 per cent under the CERS rent-subsidy program will be extended to March 13, 2021.
  • The 25 per cent rent subsidy top-up for businesses in lockdown zones like Toronto will be extended to March 13, 2021. 
  • A new program—the Highly Affected Sectors Credit Availability Program—will provide low-interest loans of up to $1 million for terms of up to 10 years for businesses of all sizes in sectors like tourism, hospitality, hotels, arts and entertainment. 
  • A special procurement pilot program will launch to open bidding opportunities for Black-owned and -operated businesses.

Rent

What: For eligible businesses needing rent relief, the government will now extend the base subsidy rate of 65 per cent in the Canada Emergency Rent Subsidy (CERS) program by three months, meaning that successful claimants who have experienced an income loss of at least 70 per cent will be guaranteed 65 per cent of their rent until March 13, 2021. 

How much: The government expects to spend an additional $2.18 billion on the subsidy extension, in addition to the $2.18 billion it had already allocated to the CERS when it was first introduced. 

The fine print: The government had previously announced a 25 per cent rent relief top-up under the Lockdown Support program for businesses affected by a full lockdown, until December 19. That is now being extended to March 13, 2021, meaning that some businesses may be able to receive up to 90 per cent in rent relief for the next three-odd months. 

The context: The CERS program was introduced as a substitute for the Canada Emergency Commercial Rent Assistance (CECRA), which was widely considered an inadequate measure to help struggling tenants with rent because it relied on the landlord to apply for government aid on a tenant’s behalf. The government had in fact already spent $1.65 billion on the CECRA prior to the introduction of this new rent-subsidy scheme. The CERS is a direct subsidy program, dispensed on a sliding scale. For example, a loss of revenue of between 50 per cent and 69 per cent would qualify a business for a rent subsidy of 40 per cent + (revenue decline – 50 per cent) x 1.25, while a business that has seen its revenue collapse by 70 per cent or more would receive a maximum subsidy of 65 per cent. The CERS itself only began accepting applications for the first subsidy period of September 27 to October 24 on November 23, but will pay out retroactively. Unlike the CECRA, businesses can apply directly for the CERS through a CRA portal.

***

Sales tax

What: Foreign firms that sell Canadian consumers digital products and services, like smartphone apps or video- and music-streaming subscriptions, or that use domestic warehouses to ship orders to Canadian shoppers, will have to collect and remit the federal sales tax. So will Airbnb and other short-term rental platforms, or their hosts—the FES specifically cites short-term-rental accommodation, leaving it to either the property owner or the platform to take and pass on the tax on rentals in Canada.

How much: The FES estimates the expanded sales-tax measures will bring in a combined $396 million in 2021–22, the next fiscal year, rising to $792 million by 2025–26.

The fine print: The new requirements won’t kick in until next summer. Platforms will have to start collecting and remitting on July 1, 2021, giving the government time for consultations. 

The context: Foreign digital platforms aren’t currently required to charge sales tax on many of their sales to Canadian shoppers or streamers. Canadian competitors have argued this puts them at a disadvantage, since consumers end up paying more overall when they buy domestic. Buyers are technically supposed to send the Canada Revenue Agency what they’d owe on their purchases, but few do—in 2017, 120 voluntarily registered entities paid a combined $3.6 million on imported taxable supplies, The Logic reported. Quebec and Saskatchewan already require foreign digital firms to collect and remit provincial sales tax.  

***

Digital services tax

What: Ottawa will impose “a tax on corporations providing digital services” starting on January 1, 2022. 

How much: The FES estimates the measure will bring in $3.4 billion over the next five fiscal years, rising from $200 million in the last three months of 2021–22 to $900 million for the full 2025–26 fiscal year. 

The fine print: There isn’t any. The FES doesn’t provide any details about how much the new digital-services tax (DST) will charge, on what revenues or to which companies it will apply. Instead, it promises more information in the 2021 federal budget.

The context: More than 130 countries are currently negotiating an OECD- and G20-fronted plan to change the way multinational corporations are taxed, aiming to prevent firms from moving profits to lower-tax countries and ensuring they pay taxes where they make their revenues rather than in the countries they’re incorporated. Tech giants are a key target. But in October, the OECD said the group wouldn’t reach a deal this year—and it’s not the first time the process has been delayed. “The government remains committed to a multilateral solution, but is concerned about the delay in arriving at consensus,” the FES states; the new DST it proposes is a stopgap measure until Ottawa can implement whatever deal the OECD-led group reaches. The OECD has warned that governments could provoke trade disputes by introducing such country-specific taxes. During the 2019 federal election, the Liberals proposed a three per cent tax on revenue from online advertising and user data for firms making at least $40 million and $1 billion in Canadian and total revenue, respectively.

The response: Bergen said CCI’s members want clarity on how the sales tax and DST proposals could affect them.

***

The green economy 

What: Natural Resources Canada (NRCan) will expand its program of building zero-emission vehicle (ZEV) charging and fuelling stations. The government will also give homeowners up to $5,000 to renovate their properties in energy-efficient ways, and launch a “low-cost loan program” to supplement those grants. 

How much: The department will get an additional $150 million over three years for ZEV-charging infrastructure, and $2.6 billion over seven years to fund residential retrofits. 

The fine print: The Liberals’ September throne speech promised a 50 per cent tax break and a new fund for companies that develop zero-emission technology. The FES introduces neither. “Targeted action by the government to mobilize private capital will better position Canadian firms to bring their technologies to market, unlocking both the economic and environmental potential of the growing global clean technology market,” it states. 

The context: Ottawa says its already funded 433 charging and fuelling stations, and another 800-plus are being built with its backing, at a combined cost of $226.4 million. Experts have told The Logic such infrastructure could help drive ZEV adoption, but have also called for more industry-focused measures if Canadian governments hope to achieve their hopes for a domestic electric car-making industry. Meanwhile, cleantech firms might have expected more from Monday’s plan. “Energy R&D and cleantech innovation are particularly vulnerable” due to the pandemic, an internal presentation prepared for then-NRCan deputy minister Christyne Tremblay warned.

***

The rest 

Ottawa will add $250 million in new money over five years to the $3.5-billion Strategic Innovation Fund. It’s already increased the program’s budget during the pandemic, adding $792 million for COVID-19-related R&D and manufacturing projects. 

Businesses most affected by the pandemic, such as those in tourism and hospitality, hotels, arts and entertainment, will be able to borrow up to $1 million for up to 10 years via the new Highly Affected Sectors Credit Availability Program. The loans will be federally funded; eligibility criteria and other details will be announced “soon.” Former finance minister Bill Morneau first promised sector-specific support in March. 

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The government will also appoint a new taskforce to create an “action plan for women in the economy.” Pandemic-related job losses and the pace of rehiring have left a disproportionate number of women out of work.

Ottawa will put $33 million over three years behind its 50-30 Challenge, announced last month, which aims to increase the share of director and senior management roles at companies, non-profits and academic institutions  held by women to parity and by members of underrepresented groups—including racialized people, Indigenous people, people with disabilities, and LGBTQ2 people—to 30 per cent. The money will pay for “diversity-serving organizations” to work with firms and charities on their strategies for improving representation and to create new online resources. 

The federal government will also waive interest on its portion of the Canada Student Loans and Canada Apprentice Loans for the 2021–22 fiscal year, at a total cost of $329.4 million. And it’s setting up a new secretariat to “provide child care policy analysis in support of a Canada wide-system,” with a $20-million budget over four years. Ottawa isn’t funding a national program just yet, however.

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Biden’s Economic Team Suggests Focus on Workers and Income Equality – The New York Times

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WASHINGTON — President-elect Joseph R. Biden Jr. formally announced his top economic advisers on Monday, choosing a team that is stocked with champions of organized labor and marginalized workers, signaling an early focus on efforts to speed and spread the gains of the recovery from the pandemic recession.

The selections build on a pledge Mr. Biden made to business groups two weeks ago, when he said labor unions would have “increased power” in his administration. They suggest that Mr. Biden’s team will be focused initially on increased federal spending to reduce unemployment and an expanded safety net to cushion households that have continued to suffer as the coronavirus persists and the recovery slows.

In a sign that Mr. Biden plans to focus on spreading economic wealth, his transition team put issues of equality and worker empowerment at the forefront of its news release announcing the nominees, saying they would help create “an economy that gives every single person across America a fair shot and an equal chance to get ahead.”

Mr. Biden’s picks include Janet L. Yellen, the former Federal Reserve chair, as Treasury secretary; Cecilia Rouse of Princeton University, to head the White House Council of Economic Advisers; and Neera Tanden of the Center for American Progress think tank, to run the Office of Management and Budget. All three have focused on efforts to increase worker earnings and reduce racial and gender discrimination in the economy.

Ms. Tanden said in February that rising income inequality was the consequence of “decades of conservative attacks on workers’ right to organize” and that labor unions “are a powerful vehicle to move workers into the middle class and keep them there.”

The two other nominees to Mr. Biden’s Council of Economic Advisers, Jared Bernstein and Heather Boushey, are economists who have pushed for policies to advance workers and labor rights, and who advised Mr. Biden in his campaign as he built an agenda that featured several longstanding goals of organized labor, like raising the federal minimum wage and strengthening “Buy America” requirements in federal contracting.

Ms. Boushey has also been a vocal advocate of policies to help working families, including providing up to 12 weeks of paid family and medical leave. In an interview last week, Ms. Boushey said such a policy was especially critical during the pandemic, “when lives are at stake.”

William E. Spriggs, the chief economist for the A.F.L.-C.I.O. labor union, hailed the selections, saying in an email on Monday that “we have not had a C.E.A. as focused on the role of fiscal policy and full employment since President Johnson.”

The team has embraced increased federal spending to help households and businesses during the pandemic, a position that was highlighted in an op-ed article that Ms. Tanden and Ms. Boushey wrote with two co-authors in March, urging policymakers to spend big even though it would require borrowing large sums of money.

“Given the magnitude of the crisis,” they wrote, “now is not the time for policymakers to worry about raising deficits and debt as they consider what steps to take.”

Mr. Biden also named Adewale Adeyemo, a senior international economic adviser in the Obama administration, as deputy Treasury secretary.

The nominees, who require Senate confirmation, will be introduced on Tuesday. Another of Mr. Biden’s picks, the former Obama adviser Brian Deese, has been tapped to lead the National Economic Council but was not included in Monday’s announcement.

Mr. Biden’s team includes several labor economists, including Ms. Yellen, who has been a longtime champion of workers and has at times suggested allowing the unemployment rate to run low for a longer period of time without worrying about inflation — an idea some economists thought imprudent but which has since become more widely accepted. While at the Fed, she balanced her preference for a strong labor market with inflation concerns and political constraints.

In the early 2000s, Ms. Yellen was instrumental in persuading the Fed’s policy-setting committee to coalesce around targeting a 2 percent inflation rate instead of the zero inflation rate that Alan Greenspan, the Fed chair at the time, originally favored. The Fed raises rates to slow the economy and offset inflationary pressures, so targeting slightly higher inflation opened the door to longer periods of cheap borrowing that can lead to stronger economic demand and lower unemployment.

Neera Tanden, nominated to run the Office of Management and Budget, has said that labor unions “are a powerful vehicle to move workers into the middle class and keep them there.”
Credit…Lexey Swall for The New York Times

As Fed chair from 2014 to 2018, Ms. Yellen favored a patient approach to policy-setting that weighed concerns that prices might heat up as joblessness dropped against a preference for pulling more workers into the labor market.

In one wonky 2016 speech, she suggested that allowing the labor market to expand without raising interest rates might help to reverse damage by pulling people in from the sidelines and prompting others to look for better jobs. She was criticized for the remarks, and later backed away from such an approach in word if not in deed. She and her colleagues lifted interest rates to fend off inflation pressures, but did so at a very slow pace, prompting criticism. Those rate increases have since been viewed as too aggressive and faulted for prematurely snuffing out a more robust labor market expansion.

Ms. Yellen also walked a careful line when it came to issues like inequality. In one 2014 speech, she suggested that widening income and wealth inequality might be incompatible with American values — “among them the high value Americans have traditionally placed on equality of opportunity” — a remark Republicans criticized.

Much has changed since Ms. Yellen was at the Fed — in ways that could allow her to embrace some of her more labor-friendly instincts if she is confirmed to the Treasury. While the Treasury secretary’s direct economic power is somewhat limited, the position holds significant sway as a fiscal policy adviser to Congress and the president, as well as oversight of tax policy through the Internal Revenue Service.

Inflation, once seen as a real and looming threat, has been low for more than a decade. Inequality, once labeled a political and liberal issue, is increasingly recognized as a real economic constraint by Democrats and Republicans alike.

Yet some progressive groups have raised concerns that Mr. Biden’s team could pivot too quickly to try to reduce the federal budget deficit once the pandemic subsides, citing past comments by Ms. Yellen and Ms. Tanden.

Economists on the left have become increasingly comfortable with deficit spending, and Ms. Yellen has long favored government intervention as a way to get the economy going during times of trouble. But she has also said America’s debt load is unsustainable, and has generally favored taxation as an offset to increased spending.

Mr. Biden, too, has expressed support for borrowing money to aid the current recovery, but sought to offset the cost of other economic proposals — like an infrastructure bill and actions to mitigate climate change — with tax increases on high earners and corporations.

In a 2018 interview at the Charles Schwab Impact conference in Washington, Ms. Yellen said the U.S. debt path was “unsustainable” and offered a remedy: “If I had a magic wand, I would raise taxes and cut retirement spending.” Last year, she described the need to overhaul the nation’s social safety net programs as “root canal economics.”

But Ms. Yellen has made clear that she does not see deficit reduction as a priority during the current crisis and that the federal government should spend what is necessary to weather the pandemic. In July, she testified before Congress with Ben S. Bernanke, another former Fed chair, and called for substantial federal support.

“With interest rates extremely low and likely to remain so for some time, we do not believe that concerns about the deficit and debt should prevent the Congress from responding robustly to this emergency,” she said. “The top priorities at this time should be protecting our citizens from the pandemic and pursuing a stronger and equitable economic recovery.”

Credit…Eric Thayer for The New York Times

Many Republicans, however, have once again begun warning about the deficit and citing mounting debt levels as a reason to avoid another large virus spending package.

Bridging those concerns will fall to both Ms. Yellen and Ms. Tanden, whose role as the White House budget director will put her in the center of fiscal fights with Congress.

Some liberal groups have raised concerns over Ms. Tanden’s 2012 remarks to C-SPAN about potential cuts to safety-net programs as part of a long-term deal to reduce federal debt.

In that interview with the network, Ms. Tanden said that the restructuring of Social Security, Medicare and Medicaid must be “on the table” in conversations about long-term deficit reduction and noted that the Center for American Progress had made such proposals.

But in 2017, as Republicans prepared to approve a $1.5 trillion tax cut, Ms. Tanden showed no desire to return to deficit reduction in a future administration. “The rule seems to be deficits only matter for Democratic presidents,” she wrote on Twitter. “And that rule needs to die now. We should not have to clean up their mess.”

Liberal senators, including Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, cheered the selections of Mr. Biden’s team, including Ms. Yellen and Ms. Tanden. Mr. Brown said on Twitter that Ms. Tanden was “smart, experienced, and qualified” and demanded that Senate Republicans confirm Mr. Biden’s team.

Republicans did not unite in opposition, though when asked about Ms. Yellen, Senator Josh Hawley, Republican of Missouri, criticized her as being a “good example of the corporate liberals.”

“She’s somebody who clearly has done the bidding of the big multinational corporations,” he said. “Her record on trade is astoundingly terrible.”

Liberal economists welcomed the picks. “There are reasons to be hopeful,” said Stephanie Kelton, a professor at Stony Brook University and the author of the book “The Deficit Myth,” which makes a case that budget deficits are not inherently bad.

Ms. Kelton helped with economic agenda-setting during the Biden campaign as a task force member, and said the fact that people like Mr. Bernstein and Ms. Boushey were included among the economic thinkers was a reason to hope that progressive ideals would have a voice at the table. That said, Ms. Kelton said she remained wary that there would be continued attention to deficits and deficit reduction.

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