OPINION:
Like other newly elected executives, President-elect Joe Biden is caught between his campaign promises and what he can reasonably deliver.
Often that comes down to money. Taxes can be raised and the future mortgaged with bonds but only so much before borrowing costs jump.
With the world awash with savings looking for safe havens and central banks printing so much money, Mr. Biden can borrow more than past presidents without moving the benchmark 10-year Treasury rate much above 1%. His challenges are more systemic — a mismatch of capital assets and skills with the needs of the post-pandemic economy and a crisis of confidence in the American system.
Businesses throughout the industrialized West have exhibited remarkable agility in adapting supply chains during the pandemic, but assets are being rendered obsolete long before their expected useful lives expire.
Aircraft, office buildings and shopping malls lead a long list. Some may be repurposed, but many corporations are writing down assets.
Most new investments have centered around the work from home revolution — home computers, collaborative software, supporting digital infrastructure and accommodating home furnishings and improvements. Lacking clarity about post-pandemic demand and climate change government mandates, businesses have been cautious about investing in new products and capacity.
Tesla — led by the most entrepreneurial American showman since George M. Cohan — is running circles around GM, Ford and others. Elon Musk can’t make enough electric vehicles to meet demand, but EVs are a paltry 2% of GM sales. Like other major auto companies, GM lacks credible hardware in the showrooms to meet the upstart’s competition.
In 2021, the economy will grow about 4%. That sounds impressive but isn’t because the economy has been significantly downsized by COVID-19 disruptions.
Most of the 5 million workers permanently displaced from jobs by COVID-19 and the closure of 100,000 small businesses must eventually go on the dole — food stamps, Medicaid and a yet-to-be-defined income support programs — or become homeless, take to the streets and potentially turn random dumpster fires into apocalypse of urban civil disorder.
The whole tenor of the Biden transition — in particular, the selection of cabinet officers and senior economic advisors — has emphasized race, gender and climate change. Yet to emerge is a strategic vision other than strict allegiance to the Goddess Woke.
The Trump administration demonstrated that firing up growth even modestly through lower taxes and lighter regulation can tighten labor markets and generate profound progress.
From 2017 to 2019, annual GDP growth averaged 2.5%, and families in the lowest income quintile saw their net worth increase 37%. Blacks and Hispanics accomplished gains of 33% and 65% but whites only 3%.
If America was as systemically racist as Black Lives Matter, the Biden transition team, academics and diversity consultants allege, those numbers simply would not have happened. Mr. Trump’s White base across the upper Midwest would have cashed in, and he would be looking at a second term.
Gender is another issue altogether. Female incomes have been stuck at around 83% of male incomes, and women took a much bigger hit during the pandemic recession.
Americans are increasingly choosing products according to how they are made — with a decided emphasis on climate friendly. Businesses don’t need to be regulated into responsible practices — consumers are compelling it in the marketplace.
Mr. Biden can do the most good by tearing down barriers to investment — not by imposing an army of woke-enforcing bureaucrats in the name of climate and social justice activism. For example, building out his system of 500,000 million EV charging stations, providing incentives for individuals and municipalities to purchase electric or hybrid vehicles, and collaborating with utilities to accelerate the transition to wind and solar power.
And creating opportunities for young people, women and the COVID-19 job-displaced to obtain technical training in certificate programs. As Rahm Emmanuel argues, those “can quickly propel a person working for minimum wage into a secure job that pays a living wage.”
The most effective way to get women back to work is to offer child care proximate to employers with hours patterned to work shifts. That requires assisting larger employers to build on-site facilities and smaller businesses to cooperatively sponsor day care with neighboring enterprises.
American capitalism isn’t prejudiced or morally debased as the radical left, empowered by the president-elect through his transition team, asserts. Rather, the conversation and public policy needs to move beyond obsessions with removing Thomas Jefferson’s and George Washington’s names from public schools to creating opportunities for ordinary folks to realize their ambitions.
• Peter Morici, @pmorici1, is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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