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



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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Bank of Canada sees economy shrinking in first quarter as second wave makes for choppy recovery –



Bank of Canada governor Tiff Macklem, an enthusiastic water skier, borrowed from one of his favourite sports to describe the current state of the Canadian economy.

“We’ve said for some time that we’re expecting a choppy recovery and, unfortunately, we’re in a very serious chop,” he


on a Jan. 20 call with reporters after the central bank released

a new forecast

that predicts an economic contraction this winter.

The forecast is a disappointing turn. Canada’s economy was gathering pace over the summer, but conditions turned rough ahead of the holidays as the second wave of COVID-19 infections forced governments across the country to restrict movement and commerce. Employers sent more than 60,000 people home in December, the first decline in employment since the spring, Statistics Canada


earlier this month.

With no immediate end to the pandemic in sight, the Bank of Canada’s forecasting team concluded that gross domestic product (GDP) will contract at an annual rate of 2.5 per cent in the first quarter of 2021, after growing 4.8 per cent in the fourth quarter, thereby offsetting the boost the economy should get from the earlier-than-expected arrival of effective vaccines.

Overall, the Bank of Canada predicts growth of four per cent in 2021, compared with a previous estimate of 4.2 per cent, 4.8 per cent in 2022 and 2.5 per cent in 2023.

“We’re moving in the wrong direction right now,” Macklem said. “We’re starting off in a deeper hole. We’ve got to climb back out of that.”

The shift in circumstances highlights the fragility of the recovery from one of the most epic recessions in history. Canada’s ability to generate wealth will be determined by the public health system’s ability to keep up with the coronavirus. There’s enough money in the system to power growth, but businesses and households won’t spend it freely until the disease is brought under control.

“That is what will determine everything,” said Darcy Briggs, a Calgary-based portfolio manager at Franklin Templeton Canada.



that he intends to leave the benchmark interest rate at 0.25 per cent until some point in 2023, and that the central bank would continue to create roughly $4 billion per week to purchase Government of Canada bonds, an approach to monetary policy that puts downward pressure on borrowing costs by augmenting private-sector demand for bonds.

Extraordinary stimulus remains essential, in part, because Canada’s economy has run into additional headwinds. The immediate future of the oil industry is clouded by mediocre prices, uncertain demand and TC Energy Corp.’s decision to stop building the Keystone XL pipeline in the face of political opposition in the United States. The dollar’s appreciation has become so problematic that the Bank of Canada felt compelled to flag it as a key risk to its inflation outlook, something it hasn’t done so explicitly since 2011.

“Appreciation of the Canadian dollar creates direct downward pressure on inflation by lowering the prices of imports,” the central bank said. “Further appreciation of the Canadian dollar could slow output growth by reducing the competitiveness of Canadian exports and import-competing production. Slower output growth would also imply more disinflationary pressures.”

The Bank of Canada’s bond-buying efforts are controversial with a minority of market participants, economists and politicians who dislike the sight of the central bank using its unique power to create money so aggressively.

In theory, Macklem is testing the central bank’s ability to contain inflation, since a massive increase in the money supply should cause prices to rise. There is no evidence of that yet, as Statistics Canada on Jan. 20


that the Consumer Price Index (CPI) increased 0.7 per cent in January from a year earlier, a reading that suggests deflation is the greater threat at the moment.

“The ongoing drag from economic slack is the most important driver of inflation dynamics over the medium term,” the Bank of Canada said in its new outlook, which predicts some temporary spikes in the CPI, but concludes that inflation won’t “return sustainably” to the two-per-cent target until 2023.

Still, Macklem began the process of unwinding his bond-buying program by reminding traders and investors that the Bank of Canada doesn’t intend to be a major player in bond markets indefinitely.

The central bank used its new policy statement to tweak its language around quantitative easing (QE), as the policy is known, saying that, as “the Governing Council gains confidence in the strength of the recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required.”

Policy-makers also used their quarterly economic report to point out that the central bank now holds about 36 per cent of all federal government debt, compared with 32 per cent in October, an amount that as a percentage of GDP is greater than the holdings of the central banks of Australia and Sweden, but less than the U.S. Federal Reserve and the Bank of England.

In other words, the Bank of Canada has more ammunition, but its armoury isn’t bottomless.

“There’s an upper limit,” Briggs said. “We’re not there yet. We assume QE will end with the pandemic.”

Financial Post

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Trump inherited a booming economy — and handed Biden a nation 'in shambles' – NBC News



More so than other presidents, and to the endless frustration of economists, Donald Trump correlated stock market performance with the nation’s economic health. However, President Joe Biden is unlikely to measure his own achievements by the gyrations of the stock market, economic experts say — and that message is likely to resonate with an anxious population.

“I doubt Joe Biden views the stock market as a barometer of his immediate success,” said Thomas Martin, senior portfolio manager at Globalt Investments. “He is focused on the health and welfare of Americans. He will gauge success on how much he can flatten the curve, prevent deaths and get the economy back in shape.”

For much of Trump’s presidency, it was easy for him to claim credit for stock gains, since he was set up for success, economists say.

“The economy was in pretty good shape. Nothing was really out of balance,” said Dan North, chief economist for North America at Euler Hermes.

Corporate expectations of lower taxes and fewer regulations sent business optimism soaring. “It was the right environment to go up. The Biden stock market has an awful lot going against it,” North said.

The Biden stock market has an awful lot going against it.”

Last March 9 and again on March 12, as the coronavirus began to take over the country, stocks fell so far, so fast, that electronic “circuit breakers” had to be triggered to stave off a full-blown collapse. That weekend, Trump tweeted, “BIGGEST STOCK MARKET RISE IN HISTORY YESTERDAY!” while saying nothing to address, or even acknowledge, the nation’s growing economic fears. The following week, circuit breakers were again triggered on two different days as stocks continued to slide.

The CARES Act, along with aggressive action from the Federal Reserve to lower interest rates and add liquidity to the financial system, ultimately stopped the market’s fall. In the ensuing months, Wall Street recovered, while Main Street suffered.

Experts say this is just one example of why it was not only pointless, but foolhardy, for Trump to claim credit for a rising market. “In the investment business, generally speaking, we know that the things that make the stock market move are myriad and complex. It’s difficult, at best, to gauge cause and effect,” Martin said.

Despite his self-professed business acumen, Trump squandered some of the market momentum he was handed, analysts say. “He did quite a few things to really impede the progress of the stock market,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “The trade war with China was, by far, the most detrimental.”

That trade war was widely regarded as a failure: It drew to an uneasy truce in early 2020, with little gained for American consumers or businesses.

The new president, on the other hand, faces a heavier lift. “President Trump is handing Biden an economy in shambles, still down nearly 10 million jobs from its pre-pandemic peak and struggling to avoid a double-dip recession,” Moody’s Analytics Chief Economist Mark Zandi wrote in a research note earlier this week.

“Whereas you might say what Trump inherited was a ‘normal market,’ Joe Biden is inheriting a market that’s at extremes,” Martin said. “You just have a whole new ballgame for Joe Biden.”

Valuations are high, inflation is broadly low but shows pockets of escalation, and market observers say Wall Street seems to be positioned for a best-case scenario regarding Covid-19 containment and immunity. Anything that doesn’t live up to the market’s lofty expectations could trigger a reversal in investor sentiment.

“If you’re the average person, do you care if GDP was 3.2 or 3.4 percent? No, you care if you have a job.”

If the market does drop from its current highs, though, economists don’t expect Biden to respond the way his predecessor might have. Unlike Trump, Biden is more likely to focus on containing Covid-19 and getting the sputtering labor market recovery going again. “The Biden administration, I think, is going to focus more on the unemployment rate and jobs and less on what the actual stock market may do,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “Right now, our immediate problem is still the coronavirus and getting the economy reopened.”

North said: “It’s going to take a long time to get those 10 million jobs back, particularly because there’s been so much permanent business closure. That’s what I believe the administration will focus on and, honestly, should focus on.”

“If you’re the average person, do you care if GDP was 3.2 or 3.4 percent?” he said. “No, you care if you have a job.”

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China’s Economy Did Well in 2020. The U.S. Economy Did Not, but It’s Better Off. Here’s Why. – Barron's



This aerial photo taken on on May 8, 2019 shows a port in Lianyungang in China’s eastern Jiangsu province.

STR/AFP/Getty Images

The numbers are in—China’s economy grew 2.3% in 2020 while the U.S.’s shrank about 3.5%—and they’re misleading.

Despite the extreme divergence, the U.S. economy performed better by many of the most important measures. That’s all the more impressive considering China’s superior handling of the coronavirus pandemic that originated in Wuhan.

The upshot: The U.S. should be in better shape as the world recovers in the years ahead.

The initial impact of the virus was almost identical everywhere, with economic output falling 20% to 30% before gradually recovering. But the recoveries in each society have differed depending on how each government responded to the economic hit from the virus.

In China, the government refrained from helping workers and ordinary households directly. Instead, the government supported politically connected businesses and local governments through cheap credit and helped exporters by intervening to prevent the currency from appreciating.

Total “aggregate financing to the real economy” rose by 35 trillion yuan (around $5.4 trillion) in 2020, compared with 26 trillion yuan in 2019 and just 19 trillion yuan in 2018. The uptick was driven by state-backed bank loans and by a surge in local government bond issuance.

At the same time, Chinese state-controlled banks and the People’s Bank of China have been aggressively purchasing foreign assets, almost certainly to manage the exchange rate. Since April, the big banks have bought $137 billion of foreign assets and repaid $20 billion in foreign debts, while the PBOC itself has added $234 billion in foreign exchange assets. In other words, Chinese government-connected entities have bought nearly $400 billion in foreign currency in the space of eight months, or almost $600 billion at an annual rate. That’s substantially higher than the rate of reserve accumulation the PBOC reported in the peak manipulation years from 2006 to 2011.

Thus, even though the yuan has gained about 10% against the dollar since the pandemic began, it’s been essentially flat against the trade-weighted basket that the government targets. Absent any intervention, China’s currency would have appreciated far more against the currencies of its trading partners to reflect the decline in the prices of commodities that China imports and the Chinese government’s relative success at containing the pandemic.

The result is that China’s recovery was led by residential construction (up 8%), infrastructure spending (up 5%), and exports (up 5%). But household consumption lagged far behind (down 4%) because the government preferred to let the tens of millions of migrant workers who lost their jobs return to the countryside and live as subsistence farmers rather than offer urban unemployment benefits.

The divergence between the Chinese government’s support of its producers and neglect of its consumers caused the country’s trade surplus to widen to its highest level ever by a wide margin.

Yes, the collapse in the number of Chinese traveling abroad due to the pandemic and the decline in commodity prices have hit imports, but that isn’t a sufficient explanation. After all, consumers who save money from deferred vacations should have more money to spend on other things, some of which may have to be imported. And Chinese exports are higher than ever. What’s the point of earning all that extra income from selling goods to foreigners if you won’t spend it on things you can’t make yourself?

It all makes for a striking contrast with the U.S. The American government provided enormous amounts of direct income support to households through one-off “economic impact payments,” enhanced unemployment insurance benefits, forgivable loans for businesses, and debt forbearance. While much of this support was saved and used to bid up the prices of housing and stocks, the government aid was also used to finance purchases of consumer goods.

These policy differences were at least as important for the economy as the two governments’ handling of the pandemic itself. China had effectively eliminated the virus from within its borders by April, but experienced an almost identical decline in consumer spending at restaurants as the U.S., which has had almost half a million people die from the virus in three separate waves. China’s success at controlling the virus was offset by its economic response, while America’s economic response helped cushion businesses from its catastrophic public health failures.

Thus, even though U.S. consumer spending on services was far lower in 2020 than in previous years, household spending on goods was significantly higher. However, the failure of governments in the rest of the world—most notably, but not only, China—to provide similar support to their own people meant that U.S. exports and American manufacturing have underperformed, especially because the U.S. didn’t try to devalue the dollar to compensate. As a result, America’s trade deficit has ballooned to its widest level ever.

Ultimately, China’s approach is less sustainable than the U.S. one. Relying on wasteful debt-financed investments and consumers in the rest of the world to keep your workers employed is dangerous, especially if those consumers—or at least their elected leaders—decide they would prefer to “decouple.” Americans, by contrast, always have the option of producing more to meet their needs. Chinese officials recognize this, which is why they have been so eager in recent months to promote their efforts to build a self-sufficient economy in part by encouraging consumption growth through “demand side reform.”

These efforts may eventually bear fruit, but the track record isn’t encouraging. While Chinese leaders have been publicly discussing problems with China’s “unstable, unbalanced, uncoordinated and unsustainable” growth model since the mid-2000s, they haven’t managed to increase the relative importance of the domestic consumer market to the economy because that would require altering the distribution of political power within Chinese society—something the Communist Party’s elites are unwilling to do.

The U.S., for all its flaws, has greater flexibility to adjust without risking social upheaval.

Write to Matthew C. Klein at

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