As President-Elect Biden puts together his cabinet and begins sketching out his priorities, expectations for his administration are beginning to crystalize. Some, including Senator Elizabeth Warren and Senate Minority Leader Chuck Schumer, are still pushing for widespread forgiveness of student loans. Others are pushing for enormous spending packages complete with large stimulus checks. Resources, however, are not infinite. Even Biden’s choice for Treasury Secretary, Janet Yellen (previously of the Federal Reserve), has said that. Senate Majority Leader Mitch McConnell has signaled openness for a reduced spending package, but it will not be anywhere near the size that House Democrats have been seeking. Economic policy should also be constrained by the Federal government’s ability to bear the debt. Some flexibility is warranted given the situation, but the last four years have not prepared us for another spending spree; the deficit was already high.
With all that in mind, Biden should be focused on where Federal dollars can go that would have the greatest impact both in the short and long term. The tagline to his campaign was “Build Back Better.” We can do precisely that with targeted investments in energy, infrastructure, and scientific research while ensuring everyone can utilize the resources of a new and improved America by providing direct cash payments. Choosing to invest in things that make our entire economy work better is the only way we can recover without creating an undue burden on our future. Over the next several weeks, I will go into more detail about some of the different options covered here along with the reasons why we do need to avoid overspending.
Politically, the Biden Administration will be flanked by a Senate that will likely be majority Republican or, at the least, split with some Democrats occupying a far more moderate stance than the progressive wing of the party. If he wishes to get anything done, he will have to appeal to a coterie of moderate Democrats and Republicans who are probably not going to support profligate spending on some of the more aggressive programs being proposed. If the staff Biden is putting together is any indication of his intentions, and it almost certainly is, he plans on trying to occupy the middle and perhaps even making bipartisan overtures.
The first priority has to be reigniting the American economy. We have been sputtering along since March with fits and starts, but there has been no momentum. State and local governments have been struggling with those that rely on tourism or retail sales for tax revenue suffering particularly acutely. Working parents have been forced to do their jobs while their children stay home and take classes over Zoom. Many of the people who have lost work are the ones that can least afford to do so and unemployment benefits are set to expire this month. We need to put cash in the hands of consumers so they can turn the crank and get the massive engine that is the US consumer economy humming again.
With that taken care of, Biden can focus on refinement. We have fallen close to $2 trillion behind on maintaining our infrastructure. Our electrical grid is a system cobbled together over the course of more than a century with some parts from the early 1900s still in use. This is not about constructing massive new projects; we need to bring our old system back into working condition. Still, technology has advanced quite a bit since then. We can improve the infrastructure to better accommodate the more sporadic wind and solar power. Highways should be supplemented with a better charging infrastructure for electric vehicles and signage or electronics specifically geared towards autonomous vehicles.
All those investments in communities across the country should not come without strings, though. We face a housing crisis that is only getting worse. Low- and middle-income families have been blocked from living in high opportunity zones with onerous zoning laws preventing the construction of more housing supply, driving up prices and exacerbating inequality. Infrastructure money should only come in return for loosened zoning laws, which would, in turn, create a new construction boom, bringing more good middle-class jobs. The only thing that will stand in the way is a hardline approach seeking too much.