EC President Biden And The 2021 Economy

The mainstream media would have us believe former Vice President Joe Biden will be inheriting a badly damaged, COVID-riddled economy which may struggle for years to recover. Many in the media claim Biden will take over an economy much like the one Barack Obama had when he took office in January 2009, following the 2008 housing bust and subsequent financial crisis.

Mr. Biden echoed this dismal economic assessment during the campaign because it made President Trump look bad and inept. But that’s simply not true. In fact, Joe Biden will be inheriting one of the strongest economies in years – if we get the COVID-19 pandemic under control in the first half of 2021 as is expected.

The current economic cycle is in no way like the one President Obama inherited and may be poised for a rapid rebound in 2021 and beyond, assuming we get the much-heralded COVID vaccines just ahead. Here are some major reasons for such optimism about the economy.

First, there is nothing fundamentally “broken” in the economy that needs a long time to heal. And unlike the last two recessions, there was no obvious financial bubble driving excessive activity in any one economic sector when the pandemic hit early this year. There is no excessive investment that must be unwound, and the financial sector has escaped largely unharmed.

Second, the indiscriminate nature of the shutdowns this past spring provides the economy with a solid base from which to grow. The economy collapsed in the spring because, in the effort to get ahead of the virus, we shut down over a third of all businesses for several months.

This created a lot of opportunities to rebound when the unnecessary causalities of the shutdown came back online and began to grow despite the virus. That process will continue and should even strengthen once the virus is on the decline.

Third, household balance sheets were not crushed like they were in the last recession. Instead, the opposite occurred. Reduced spending, fiscal stimulus, rising home prices, and a buoyant stock market have all helped push household net wealth above its pre-pandemic peak.

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