CNN Business/Chris Isidore
Stimulus is nice. But here’s what Biden really needs to fix the economy
Joe Biden last week proposed a $1.9 trillion stimulus bill, part of a historically ambitious plan to combat an economic crisis.
But many economists and business leaders agree that no amount of government assistance to individuals and small businesses can fix the economy until the underlying cause of the problems — the Covid-19 pandemic — has been defeated. At best, the combination of the $900 billion plan passed in December, and this plan from the president-elect, can only help the economy to continue to tread water until the pandemic is under control.
“This is a very large package, but it’s about helping the economy hang together as well as it can hang together until the end of the pandemic,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi and other economists believe that the gross domestic product, the broadest measure of the nation’s economic activity, could soar if Biden gets his full package soon after taking office. But job growth will be far more muted.
The US economy lost 22 million jobs in March and April and ended the year with another 140,000 net jobs decline. Even with the 12.5 million jobs recovered in between, that left the headcount at US employers down nearly 10 million during the pandemic. Moody’s forecast that those jobs won’t be fully recovered until 2022, even if Biden gets his full package.
“We get a lot of growth in GDP up front, but it’ll take 18-24 months to get all those jobs back,” said Zandi. “A lot of people just can’t go back to work until the pandemic is in the rearview mirror.”
And unfortunately, the message from public health experts is clear: The pandemic is going to get worse before it gets better.
U.S. retail sales fall again in December
U.S. retail sales declined further in December as renewed measures to slow the spread of COVID-19 undercut spending at restaurants and reduced traffic to shopping malls, the latest sign the economy lost considerable speed at the end of 2020.
Retail sales dropped 0.7% last month, the Commerce Department said on Friday. Data for November was revised down to show sales declining 1.4% instead of 1.1% as previously reported. Economists polled by Reuters had forecast retail sales unchanged in December.
Excluding automobiles, gasoline, building materials and food services, retail sales tumbled 1.9% last month after a downwardly revised 1.1% decline in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have decreased by 0.5% in November.
The report followed in the wake of news last week that the economy shed jobs in December for the first time in eight months. Further job losses are likely in January as new applications for unemployment benefits surged in the first week of the month. The data are in line with economists’ expectations for a sharp slowdown in economic growth in the fourth quarter.
Outlook darkens for Wall Street as Biden’s regulators take shape
Wall Street may be facing an uncomfortable four years after President-elect Joe Biden’s team confirmed on Monday it planned to nominate two consumer champions to lead top financial agencies, signaling a tougher stance on the industry than many had anticipated.
Gary Gensler will serve as chair of the Securities and Exchange Commission (SEC) and Federal Trade Commission member Rohit Chopra will head the Consumer Financial Protection Bureau (CFPB). Progressives see the agencies as critical to advancing policy priorities on climate change and social justice.
Wall Street-friendly Republicans on Monday criticized Biden for bowing to leftists, warning the picks would be divisive.
“The Biden team is pandering to members of the far-left,” Patrick McHenry, lead Republican on the House of Representatives finance panel said of Chopra, while warning Gensler should “resist pressure to commandeer our securities disclosure regime to try to fix non-economic issues or social problems.”
The chair of the derivatives regulator from 2009 to 2014, Gensler implemented new swaps trading rules created by Congress after the financial crisis, developing a reputation as a tough operator willing to stand up to powerful Wall Street interests.
Chopra helped set up the CFPB after the crisis and served as its first student loan ombudsman. At the FTC, he campaigned for tougher rules for big tech companies on consumer privacy and competition, and for stricter enforcement penalties.