Bouncing back from a recession, the U.S. economy will grow 6.6% in 2021, Goldman Sachs projects . After that things get tougher for President Joe Biden, and he will be hard pressed to match President Donald Trump’s record on inequality.
Work from home and enhanced digital platforms are forcing airline employees, waiters, retail clerks and other low-wage workers into job markets that pay less, require relocation or offer too few employment opportunities . Office buildings, storefronts, aircraft and other assets must be scrapped or repurposed at significant cost.
Biden’s reorientation of the U.S. economy— slowing oil and gas well and pipeline development and raising the social cost of carbon used to set environmental regulations—will leave still more workers and assets stranded.
Stimulus won’t cut it
Tax cuts and stimulus payments can’t rescue most of those people and businesses, and the Federal Reserve has run the string on easy-money policies.
Last year, Tesla /zigman2/quotes/203558040/composite TSLA +3.69% sold nearly 500,000 electric vehicles , whereas Ford’s /zigman2/quotes/208911460/composite F -1.04% bonds have been downgraded to junk status .
If the Fed raises interest rates as unemployment falls, it would instigate business failures that push high-tax local governments into budget crises that instigate self-defeating cycles of even higher taxes, business and middle-class flight, more empty offices and store fronts and decaying transit systems and schools.
If the Fed continues to enable foreign borrowing to finance companies and cities at rock-bottom rates, profligate borrowing will erode the dollar’s status /zigman2/quotes/210673925/realtime XX:BUXX -0.08% as the global reserve currency. America could become vulnerable to a debt crisis as multinationals and foreign central banks slow purchases of dollar-denominated securities.
Firing up growth in an economy that offers dignified work for all workers requires microeconomic solutions.
Near term, promoting more business-based training programs and a skills-based immigration policy would drive high-tech growth, enable innovation generally and create jobs in new locations for the sandwich makers, accountants and other service providers displaced from New York’s and California’s collapsing civil fabrics.
Those would include enhanced unemployment benefits linked to reskilling programs, making social benefits such as housing subsidies transferrable across state lines and federal funding for relocation stipends—all would be unsettling for Republicans. And rethinking the thicket of state licensing requirements that impeded interstate mobility of skilled professionals and technicians—that would upset Biden’s union constituencies.
Longer term, progress requires repurposing high schools toward digital trades and raising the U.S. fertility rate — now at 1.8 —to sustain our labor force and support for the elderly. Conversations about how families and workplaces are structured to encourage larger families reaches deeply into personal choices and private business practices that progressives and conservatives alike would find discomforting.
Along with a better skilled and sustainable labor force, greater investments in infrastructure and intellectual capital are needed For decades, federal support for R&D has been declining , while China offers more subsidies to technology c hampions.
Allocating more funds to R&D is easy—if the Federal Reserve can print money for stimulus checks, it could instead print money to build better roads and finance university and industry research—but spending effectively is another matter.