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The Financial Express

Biden economic team: A steep challenge ahead


Biden economic team: A steep challenge ahead

President elect Joe Biden announced his economic team last week. He hopes his  six person economic team  can guide the US back to solid economic footing. The president elect referred to the team as "first rate" and well equipped to meet the dual challenges of pandemic and the present sputtering economy. He further added "A team that's tested and experienced, it includes groundbreaking Americans who come from different backgrounds  but also share my core vision of economic relief here in the United States of America".

During the news briefing last week, Biden's nominees spoke of working or middle class background, suggesting they are in sync with the reality of economic struggles which millions of American face now. They have been portrayed as people without a sense of entitlement. Robert Reich, Former US Secretary of Labour described the team as  "a good team. They 're competent and they care".

But the reality is very different, most of Biden's economic team members are drawn entirely from major financial institutions and hedge funds. Janet Yellen tops the list and also the first female to hold the position of Secretary of Treasury in its 231 years of  history. She is a former Chair of US Federal Reserve and of the Council of Economic Advisers (CEA). In fact, she had a pretty long stint at the Fed form 2010-2018, first as deputy Chair from 2010-14 and then as Chair from 2014-18. This indicates she played a key role  in help shaping economic policy for the bulk of the Obama administration period. Her long term view on debt is a clear indication where her priorities lie and makes people worry when in February she said, "The US debt path is completely unsustainable under current  tax and spending plans''. A clear indication to welfare cuts when the pandemic is over.

Janet Yellen during her tenure at the Fed was the key figure associated with the policy of "quantitative Easing" (QE) which her predecessor Ben Bernanke initiated.  The policy involved buying the big banks taxic assets, thus making very large sums of money available to the financial markets. She represents what is called "Easy Money" for the banks. For High Finance, having Yellen at the helm means as one commentator said "It's a sign there won't be anything extreme". In fact, Joe Bided already promised his Wall Street campaign fund donors that "Nothing would fundamentally change".  Fox News said "Wall Street loves Janet Yellen" and the Dow Jones Industrial Average hit a record high.

Her Deputy at the Treasury Department is Adewale (Wally) Adeyemo, a former Obama aide and a Senior Adviser at Black Rock, the world's largest hedge fund manager. Surprisingly,  he has also had experience with national security, a rare combination of concerns for national economic welfare and national security which should bring him much closer to understanding the needs of the military industrial complex in designing national economic policy.

Biden's nominee for the Office of Management and Budget is NeeraTanden, currently chief executive of the Centre for American Progress (CAP), a major Democratic Party think tank. CAP like the Centre for Strategic and International Studies (CSIS) also received from the UAE US$2.5 million to fund national security and international studies. In a way she could also be considered as the second (wo)man of the UAE in Washington D.C. after Michele Flournoy,  a cofounder of CSIS and was a strong contender for the position of Secretary of Defence.

But Flournoy was bypassed and General Lloyd Austin, a former Iraq war commander who retired as the Chief of the US Central Command was appointed as Defence Secretary. General Austin told the Washington Post of the Iraqis on the eve of the US invasion of Iraq that " We can see them. And what we can see, we can hit, and what we can hit, we can kill, and the kill will be catastrophic". Indeed, the invasion and occupation of Iraq claimed the lives of over a million Iraqis and turned millions more into refugees and devastated the whole country and the society.

Tanden is a veteran of both the Clinton and Obama administrations. Her appointment has been described by many as  revealing and also controversial. She has been a well known figure belonging to the dominant pro-corporate faction of the Democratic party credited with  crafting market based Affordable Care Act . CAP endorsed "Chain CPI" based social security payments, a method that causes lower  benefit payments in real terms. In fact, she is so well known for her various activities in Washington that a commentator already opined that a whole book could be written on her.

However,  the most outrageous  policy prescription she devised  was how the US could recoup the costs of invasion and destruction of Libya in 2011. Glenn Greenwald, a veteran US journalist summarising  Tanden's views  wrote " Libyans should be forced to turn over large portions of their oil revenues to repay the US for the costs incurred in bombing Libya, on the grounds that  America will support future wars only if they see that countries attacked by the US pay for the invasions".  CAP also supported military interventions in Syria and Iraq to fight ISIS. Bur strangely enough, ISIS has been   supported and financed by the US ally Saudi Arabia to fight the Assad regime in Syria. She called Julian Assange "the agent of a pro-fascist state, Russia".

Other members of the Economic team include Cecilia Rouse, Dean of the Princeton School of Public and International Affairs, nominated as Chair of the Council of Economic Affairs and its two members are Jared Bernstein and Heather Boushey, both served as economic advisers to Joe Biden during his time as Vice President.

The pandemic is the most pressing challenge facing the incoming administration. But structural inequities, poverty and out of control concentration of wealth also are other major challenges facing the incoming administration. For the last 40 years hourly wages have stagnated, yet only 6 per cent of the working population are unionised. The federal minimum wage has remained at US$7.25 since 2009. The stock market's upward spirals only benefitted the wealthy at the expense of wage earners. It is estimated that 60 per cent of wealth in the US is inherited. The wealth of US billionaires surged past US$1 trillion in 2020. Public investment as a share of GDP now stands at its lowest since the WWII.

The latest data released by the Bureau of Economic Analysis show real GDP increased at an annualised rate of 33.1 per cent in the third quarter of 2020 against a real GDP decline of 33.1 per cent in the second quarter. This indicates the recession is over but that is a cold comfort for millions of middle and low income families across the US. They have hardly reaped any benefit from such a recovery.

 According to a report published by the Century Foundation " It's not surprising that boasts of a record breaking economic recovery ring hollow to most Americans, for whom to-day's wages are barely enough  -- and often not enough  -- to meet their basic needs, let alone the conditions of a modern middle class life, like adequate health care and a quality education  for their kids". An estimated 83 million adults-- 34 per cent of the adult population of the US are currently struggling to afford basic necessities such as food and rent, yet  dozens of pandemic relief provisions are set to  expire before end of this month.

But that did not deter the House of Representatives last week to overwhelmingly approve US$741 billion for Pentagon, the largest military budget in American history. Democrats supported the passage by 195-37 and Republicans by 140-40. In fact, more Republicans opposed the passage of Pentagon spending than Democrats. There is basically no disagreement between the two major political parties in the US on funding the largest and most lethal military machine in the world. This demonstrates the reality of American politics and the scale of the military industrial complex and the scope of its power that even Eisenhower could not have imagined. This also signals the incoming Biden administration's readiness to pursue an escalating militarism abroad.

Biden's economic team is definitely strong on what in the US political lexicon is called "progressive" talks as reflected in championing a more activist government to reduce inequality and for a stronger social safety net. But people surrounding Biden come from the Clinton-Obama faction or more precisely pro-corporate faction of the Democratic party. So, Biden presidency is likely to follow a centrist economic policy which will soften the hard edges of neoliberalism, but neoliberal policy orientation will remain in place due to the tremendous influence big corporations exert on the Democratic Party machine. The big business has no problem supporting economic stimulus packages because more jobs means more profits. But they will oppose any tax hikes to finance infrastructure development or education or for environmental protection or changes to election campaign finance or unionisation of workers. So the core problem of structural inequities will persist.

The problem with economic centrism is that it is devoid of  both ideas and courage to break with the past. As the political climate is increasingly getting polarised in the US between the right and the left, it will make such a centrist political or economic positioning rather very unstable. More ominously, the far right in the US with Trump at the helm is far more united and determined than any other political forces in the country. Trump with his furious mob of 74 million along with traditional Republican conservatives  and the Senate on his side will make it very difficult for Biden to push through even very modest centrist economic initiatives.

Therefore, it remains to be seen whether Biden team succeeds. The Financial Times is highly sceptical about Biden administration's ability to achieve much economic success. In a recent article it opined "Mr Biden will inherit a vaccine drive that ought to trigger a short-term recovery. Beyond that, however, American capitalism is badly in need of a reset".

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