Washington—When Joe Biden walks in to the White House as president in January, he will have the opportunity to reshape the world’s largest economy, but first he will have to get it back on its feet.
The United States is starting to recover from a historic contraction in growth and tens of millions of job losses caused by the world’s largest Covid-19 outbreak, which spoiled the previously healthy economy and contributed to voters’ decision to oust President Donald Trump in this week’s election.
On the campaign trail, the 77-year-old former vice president promised a slew of policy departures from Trump, such as raising the minimum wage, rewriting the tax code, investing massively in infrastructure and lowering the country’s carbon emissions.
But in order to achieve those, he will first have to subdue the coronavirus pandemic, while navigating a Congress that could be split, with Biden’s Democrats holding a narrow majority in the House and control of the Senate still undecided.
“He has an ambitious policy agenda, it’s hard to argue with that. You can certainly argue it’s not ambitious enough,” said Shai Akabas, economic policy director at the Bipartisan Policy Center.
Like former president Barack Obama, under whose tenure he served as vice president, Biden takes office with an economy that is reeling.
The $2.2-trillion CARES Act stimulus package passed in March helped temper some of the damage caused by business shutdowns to stop Covid-19 from spreading, but key parts of that law expired and the economy is far from healed.
If the outgoing Congress fails to approve a package in the closing weeks of Trump’s presidency, getting a stimulus measure approved will be one of the first things Biden does, Akabas said.
Next, Biden likely will turn to the tax code, as practically every American president does at some point in their term.
Trump did so in 2017 lowering taxes on corporations and the rich.
Mark Duggan, director and senior fellow at the Stanford Institute for Economic Policy Research, said Biden will likely try to reverse those cuts, cranking rates back up on the country’s largest businesses and people making more than $400,000 a year.
“For the typical American, tax policy changes from a Biden administration are going to be pretty minimal. I think for high income people they’re going to be quite significant,” Duggan said.
Kyle Pomerleau, resident fellow at the American Enterprise Institute, warned the short-term gains from higher taxes on the wealthy could eventually depress business activity and undermine whatever benefits a stimulus package brings.
“I think it would be unwise for him to, on one hand, provide a stimulus and then, on the other hand, take some of it with a very large tax increase on employers,” he said.