How Joe Biden can pull off a US ‘economic miracle’ and secure his legacy
- Biden’s quest is to ensure a higher percentage of US economic demand is met domestically without further inflaming tensions with China
- Unemployment is falling and long-term growth prospects are looking up, but there is still much to do to lure lost productive capacity back home
That could go a long way towards cutting America’s yawning trade deficit, especially with China. If Biden can pull off a decent trade deal with Beijing and point the US towards an economic resurgence, it could be his lasting legacy.
It might be early days, but his economic scorecard is looking OK so far. Biden has pumped record amounts of money into the economy, long-term growth prospects are looking up and job creation is coming back vigorously after the Covid-19 shock.
The plan will probably be pared back to get it through Congress, but it is fair to say the US has rebounded from deep recession thanks to the vital boost to consumer and business confidence with so much government money being thrown into the economy.
The rally in the jobs market has provided a massive boost to consumer spending intentions, with more than 17 million people returning to the workforce since the height of the Covid-19 crisis in April 2020.
The correlation between the US budget deficit, the country’s yawing trade gap and the US-China trade deficit is plain to see. Biden’s quest is to ensure a higher percentage of US economic demand is met domestically without further inflaming tensions with China over trade.
It’s not just a matter of shoring up America’s ailing infrastructure but rebuilding the nation’s industrial power base with the right kind of financial incentives, regional assistance and targeted tax breaks for new investment. Corporate America needs to believe in Biden’s vision for a revitalised economy, too.
It is just a microcosm of what is needed on a much grander scale. Luring back the productive capacity, which was lost overseas thanks to the strong US dollar, failing export competitiveness and globalisation, won’t be easy.
The US economy needs a capital-intensive, hi-tech corporate renaissance that will create new jobs and fast-track growth back to its 3.5 per cent long-term potential. It might seem like Mission Impossible, but Biden will give it his best shot.
David Brown is the chief executive of New View Economics