After months of lambasting former President Donald Trump for mishandling the economy amid the pandemic, President Biden is starting his administration enjoying a favorable economic outlook — an enviable position for a new president but one that economists warn could be wasted with unnecessary or damaging policies.
The economy is projected to grow in 2021 at its fastest rate in 17 years, according to a report from the Congressional Budget Office this week, thanks to the legislation passed so far and the record-breaking pace at which numerous successful vaccine candidates were developed, authorized, and distributed.
The Conference Board, a nonprofit business research group, also raised its forecasts for 2021, citing “stronger than expected economic indicators in November and December,” the relief package passed in December, and “continued progress in the deployment of multiple COVID-19 vaccines.”
“If the new CBO forecast is an accurate prediction of the economy during the next few years, President Biden will preside over a period of healthy growth and falling unemployment,” the American Enterprise Institute’s Alex Brill told the Washington Examiner.
Economists warned, though, that the projections would not benefit Biden without tangible results — even polls that favored Biden overall found that voters still thought Trump would handle the economy better.
“It will be the actual performance of the economy that will determine how polls and voters give ‘credit’ for the economy, not forecasts. As such, we’ll need to wait and see on that one,” Brill said.
Doug Holtz-Eakin, president of the conservative American Action Forum and former director of the CBO, told the Washington Examiner that it was the CARES Act, the $2.2 trillion coronavirus relief package signed into law in March, that deserved the most credit for the recovery.
“The CARES Act, which was done literally in a unanimous, bipartisan fashion was an enormously successful piece of legislation, and Congress and the [Trump] administration deserve all the credit in the world for getting that done, getting it done quickly, and getting it done on a scale that mattered,” Holtz-Eakin said, adding that Biden’s attempt at passing his own massive relief package, to the tune of $1.9 trillion, would be “really misplaced” given the strong economic forecasts.
Republicans in Congress have used the CBO report to argue against Biden’s recovery plan.
“Rather than spending billions to bailout state governments, let’s help those families that are being harmed by misguided state and local lockdowns and President Biden’s job destroying executive orders,” Rep. Jason Smith of Missouri tweeted Monday.
If the Biden Administration wants to help those struggling during COVID, they should shelve the partisan agenda they are pursuing which will weaken the economy, destroy jobs, and harm the working class.https://t.co/xYxdr4m11G
— Rep. Jason Smith (@RepJasonSmith) February 1, 2021
Holtz-Eakin said that there were “diminishing returns” to such a broad recovery package and suggested that the administration should take a piecemeal approach, addressing issues such as ramping up vaccination rates first and then reevaluating later.
The former CBO director also criticized the Biden administration’s plan to raise taxes on corporations, saying that it would be “a big policy error to have a sharp increase in the corporate tax rate at this time.”
AEI’s Brill said that the forecasts “support the view that a smaller package and a bit of patience might be even more reasonable” than another broad package but noted that the economic tailwinds could allow Biden to “weigh a wider set of policy objectives, including campaign promises related to curbing climate change or healthcare.”
Many Democrats have taken strong stances against piecemeal relief bills, however, warning that letting up on broad relief now will lead to a repeat of the slow recovery the country saw after the 2008 financial crisis.
Addressing the coronavirus pandemic with sweeping relief legislation was not only a major part of Biden’s presidential campaign but also became a rallying cry during confirmation hearings for Biden’s Cabinet, particularly for Treasury Secretary Janet Yellen. She stressed the need to “act big” throughout her hearing, and before her vote in the full Senate, incoming Senate Finance Committee Chairman Ron Wyden warned the Senate not to “commit again the mistake of 2009.”
“In 2009, the sense was, well, maybe we’re getting there on economic recovery — we’ll be able to come back later if maybe we didn’t do enough,” Wyden said. “Well, we all know that a missed opportunity is a missed opportunity. And in 2009, the Congress said, ‘All right, we can take our foot off the gas now.’ It was too early, and there wasn’t any next effort to make up for the damage. I’m committed to make sure that doesn’t happen again.”
“This time around, the Congress has been warned,” Wyden added.
