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President-elect Joe Biden is inheriting an economy that remains badly scarred by the coronavirus, including high unemployment and financial hardship for millions of Americans. The upshot: He has a mountain to climb, especially as COVID-19 cases soar to alarming new heights and with control of the Senate still up in the air.

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Here are the major economic challenges facing the Biden administration, along with how the change in the White House might impact everything from jobs and your taxes to health care and climate policy. 

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Jobs: “This massive hole”

As of October, nearly 26 million Americans were either out of the workforce or not working as many hours as they would like, according to Heidi Shierholz, senior economist at the Economic Policy Institute and formerly the chief economist at the Department of Labor in the Obama administration. Although unemployment has fallen from 14.7% in April to 6.9%, roughly 15% of the country’s workforce remains either jobless or underemployed.

The rebound in jobs is also expected to slow in the months ahead as another coronavirus wave sweeps across the U.S. “The pace of job growth is slowing and we still have this massive hole in the labor market,” Shierholz told CBS MoneyWatch. 

No surprise, then, that Mr. Biden’s top economic priority is curb COVID-19. “We cannot repair the economy … until we get this virus under control,” he noted in his acceptance speech on Saturday.

Mr. Biden also wants to provide more financial relief for jobless workers and businesses hurt during the pandemic as well as shore up federal funding for cash-strapped state and local governments. That won’t be an easy lift — Senate Republicans have pushed to limit the scale of another stimulus package, while President Donald Trump’s defeat at the polls could dissuade him from signing off on another bill. 

Still, Mr. Biden could still accomplish a lot on the economic front through executive orders and federal rule changes, Shierholz said. For instance, he could boost the federal minimum wage for people working on government contracts, which amount to 4 million workers, according to the Brookings Institution. Mr. Biden is also expected to reverse some Trump-era rules, such as one that made it more difficult for many workers to qualify for overtime pay.

Stimulus: When and how much?

Ensuring continued job growth could hinge on the government offering another substantial round of relief, with economists crediting the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (or CARES) Act passed in March with helping businesses and unemployed workers stay afloat financially.

With many of those CARES Act programs now expired, Mr. Biden is expected to push for a generous stimulus package that could both boost the economy by driving spending and get unemployed workers through what might a tough winter, given rising coronavirus rates. 

“Stimulus is absolutely crucial and totally tied to how well the labor market does,” Shierholz said.

David Kelly, chief global strategist at JPMorgan Funds, thinks the Senate may opt to pass a smaller aid package before Mr. Biden’s inauguration in January. That would likely provide more money for the Paycheck Protection Program, which offers loans to small businesses, as well as fund supplemental unemployment benefits.

And another package could be forthcoming in early next year, according to Kelly. One effort likely to be renewed is the $1,200 stimulus payment for single adults and $2,400 for married couples, 

Taxes: Credits for first-time homebuyers and parents

Mr. Biden has proposed raising taxes on high-income Americans and corporations by as much as $4 trillion over the next decade.  But the president-elect would need Congress to sign on as well — that won’t be easy if Republicans retain their majority in the Senate after two special run-off elections in Georgia in January. 

“Obama had a hard time negotiating with the Republicans to raise taxes, so I suspect it will be the same for Biden,” said economist Dean Baker, co-founder of the Center for Economic and Policy Research, a liberal-leaning think tank. 

That means the income tax or estate tax increase for individuals, including higher-income people, are unlikely to happen. But Mr. Biden has pushed for some tax credits. He’s likely to get support from both sides of the political aisle for those given the state of the economy. 

The most likely tax break is a $15,000 credit for first-time home buyers to offset the cost of a downpayment. Republicans might also side with Mr. Biden and Democrats who would like to expand the the child tax credit to as much as $3,600 per child, from the current $2,000 (Mr. Biden would like to award those tax credits in monthly installments, rather than a one-time lump sum at tax time.)

As for corporate taxes, the president-elect could effectively get a large portion of his proposed increase even without swaying Congress. That’s because the corporate income rate cuts passed under Mr. Trump in late-2017, unlike the individual ones, will start to expire during Mr. Biden’s first term.

In 2022, companies will start phasing out a tax cut that allowed them to temporarily expense a large portion of their research and development and capital expenditure costs upfront. Recognizing those expenses immediately, rather than spreading them over a number of years, reduces near-term profits and corporate tax bills. 

Morgan Stanley has previously estimated the change will boost corporate taxes by $800 billion over a decade. And Mr. Biden might be able to negotiate an overall tax deal sooner given that an increase would happen anyway. 

“Extreme policy changes are likely off the table,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “But I think there is bipartisan support for establishing a minimum corporate tax rate so that no company can avoid paying taxes altogether.”

Some of any corporate tax increase could be passed along to consumers in the form of higher prices or lower wages. Earlier this year, an analysis from Wharton’s business school estimated that the average workers’s take-home pay could drop by $216, if all of Biden’s tax plans were implemented. Top 1% wage earners, though, would pay nearly $50,000 more.

Investments: A Biden boost

Mr. Trump claimed before the election that the stock market would crash if Mr. Biden won. So far, however, stocks have surged. The Dow is up nearly 1,000 points since Mr Biden was anointed as president-elect. Even before the election, many stock market strategists predicted that Mr. Biden’s policies would lift both the economy and the market.

“Looks like Biden won and the market didn’t crash,” Sonders said. “That was rhetoric, but there was no reason to believe that would happen.” 

In the aftermath of the election, investors appear to be cheering that Republican wins in the Senate means Mr. Biden won’t be able to pass his most aggressive corporate tax increases. Either way, corporate profits are likely to soar next year if, as many experts think, a vaccine becomes available next year.

That doesn’t mean investors are in the clear. The coronavirus will still almost certainly weigh on the economy for months to come, while a markets-boosting stimulus package may have to wait until 2021.

Sonders points out Wall Street doesn’t have a great record of predicting what will happen in the stock market based on who the president is. Financial stocks and oil producers were expected to be the biggest beneficiaries of Mr. Trump’s deregulation, but stocks in those two sectors have lagged the rest of the market over the past four years.

“There are so many forces that drive the market, and whether the White House is blue or red is not a big one,” she said.

Health care: A chance to expand coverage

Mr. Biden campaigned on dramatically expanding the Affordable Care Act, but consumers shouldn’t hold their breath. Nearly every major proposal from the campaign — including increased subsidies for individual health insurance plans, incentives for states to expand Medicaid and a federal “public option” for health insurance — relies on Congress passing legislation. So that would be a tall task in normal times, and an even harder one if Republicans maintain control of the Senate. 

“[T]he probability of a bipartisan compromise on any health policy legislation is below 50%,” analysts at the investment bank UBS said in a note.

There are some changes Mr. Biden could take unilaterally to expand insurance coverage or reverse Trump administration changes. The new administration could extend the open enrollment period for ACA plans, allowing more time for consumers to sign up for health insurance. Mr. Biden could also require that health plans offer equal coverage for mental health care  and cover contraception, reversing a Trump administration move.

The administration could also lower the costs of certain prescription drugs, such as insulin and epinephrine (a key ingredient in EpiPens) by using something called “compulsory licensing authority.” This allows the government to bypass patents for certain “essential” medications and manufacture cheap alternatives.

And Senate Democrats and Republicans could conceivably  pass a modest bill reducing prescription-drug prices, said Tricia Neuman, senior vice president at the Kaiser Family Foundation.

Mr. Biden’s prescription cost proposal shares many elements with a bipartisan bill introduced last session by senators Chuck Grassley of Iowa and Ron Wyden of Oregon. The bill would set limits on how much drug prices could rise annually and limit out-of-pocket drug spending for some Medicare recipients, Neuman noted. “It wouldn’t be everything that was in the Biden proposal,” she said, “but it’s a start.”

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