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Biden Turns to a New Generation for Economic Advice

Biden Turns to a New Generation for Economic Advice

Tuesday, 17 November, 2020 - 05:00

To prepare for his transition of power, President-elect Joe Biden has created agency review teams tasked with understanding the operations of various government bureaucracies. Those appointments provide clues to how he might govern.


In the case of economic policy, Biden looks set to empower a younger generation of empirically-minded progressive economists who take a pragmatic view toward fighting recessions and inequality.


Biden’s review team for the Council of Economic Advisers consists of three economists: Martha Gimbel of the philanthropic foundation, Schmidt Futures; Damon Jones of the Harris School of Public Policy at the University of Chicago; and Jay Shambaugh of George Washington University.


Shambaugh has the most experience in the world of government and policymaking, having served two previous stints at the Council of Economic Advisers under President Barack Obama and also as the director of the Brookings Institution’s Hamilton Project. Though his academic research deals with trade and exchange rates, Shambaugh has written on a large number of big policy issues -- the COVID-19 pandemic, wage growth, automatic stabilizers, climate change, and many more.


Jones, the most academically oriented of the group, has written papers on a broad array of public policy programs including education, basic income, Social Security, retirement plans, tax refunds. Gimbel has spent most of her career in the private sector and has primarily focused her work on jobs and employment.


The lineup hints at the dismaying breadth of challenges the Biden administration will be facing. Covid-19 is still raging, and the recession it spawned threatens to outlast the pandemic for years. Wage stagnation, rising inequality and increasing precarity have plagued the US economy for decades. Behind it all looms the dread specter of climate change.


Picking experts with enormous breadth like Shambaugh and Jones suggests that Biden will be thinking very hard about how to allocate political capital and decide which problems to attack first. The inclusion of Gimbel, though, suggests that getting the US out of its pandemic-induced recession will probably be job No. 1.


The team also offers clues to Biden’s economic policy orientation and ideology. They’re supporters of more activist government, for both recession-fighting and in terms of addressing longer-term issues such as wage stagnation. Nor are they the neoliberal tinkerers of the 1990s, obsessed with targeted programs, clever incentives and fiscal limitations; these economists are likely to advocate big, simple, powerful interventions. This approach reflects a changing consensus on the center-left -- a realization that small tweaks won’t cut it against the big challenges of the new century.


But it’s also a very empirically driven group. Unlike many leftists whose positions are guided by a combination of high theory and pure ideology, these economists are extremely data-oriented and pragmatic. They represent not the rejection of mainstream economics that leftists would like, but rather a shift within the profession -- a movement away from free-market theory and toward empirical analysis that often (though not always) shows the effectiveness of government intervention.


There's more than just the CEA transition appointments for sussing out Biden’s inclinations on economic policy, with teams assessing the Treasury Department, the Office of Management and Budget, the Office of the United States Trade Representative and more. It's difficult to draw conclusions from people with such a broad array of backgrounds, from tech companies to regulators to academia, but the selections generally telegraph a combination of pragmatism and progressivism.


And there are a few more clues here and there. The trade team includes Council on Foreign Relations economist Brad Setser, who has tirelessly railed against trade imbalances and currency manipulation by foreign exporters. That appointment strongly suggests that Biden will not be returning to the free-trade consensus of the pre-Trump era, but will instead take a harder line against Chinese competition in particular. Lily Batchelder, a specialist on taxation who has suggested an innovative new type of inheritance tax, is on the Treasury team, suggesting that the Biden administration is thinking about taxing the very wealthy at higher rates.


This sort of tea-leaf reading can’t answer the question of what Biden will actually be able to accomplish. Pushing through big changes will be a tall order with a probable Republican-controlled Senate and a number of conservative Democrats, and Biden will probably be forced to resort to small-bore executive action in many cases.


But it’s clear that Biden will preside over a new type of Democratic administration -- one that’s at least willing to aim high and contemplate bold action against a variety of problems, rather than contenting itself with small tweaks and competent management. That’s the kind of administration the US could use more of.


Bloomberg


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