Tackling growing inequalities, Joe Biden's number one economic challenge

Protest messages on a building window in the Columbia Heights neighborhood of Washington, USA on May 18, 2020. REUTERS - TOM BRENNER

Text by: Agnieszka Kumor

7 min

D-Day for the inauguration ceremony of Joe Biden in Washington.

A ceremony under high tension, two weeks after the invasion of the Capitol by supporters of Donald Trump.

For the new president, the challenges are enormous.

Sanitary, but also economical.

Publicity

Read more

The objective of the 46th President of the United States will be to get his country out of the deep economic crisis into which the Covid-19 epidemic has precipitated it by tackling several projects.

Plan to cure the sick economy

Mobilizing the means to vaccinate as many Americans as possible will be his first priority.

Next is a $ 1.9 trillion emergency plan.

Direct aid to families and small businesses announced last week, in addition to the $ 2 trillion disbursed by Donald Trump's team in the spring.

Later, there will be a recovery plan.

A colossal effort for a sick country, declared Joe Biden: “ 

During this pandemic, millions of Americans, through no fault of their own, have lost the dignity and respect that come with work and wages.

Millions of Americans expect to be laid off and have to be stranded for hours in their cars in front of food banks in order to feed their families.

Here is what is happening in the United States today.

"

A new social policy

If unemployment remains stable at 6.7%, the daily life of these people is not improving.

18 million Americans receive social assistance.

It is about giving them back purchasing power, but then starting a virtuous circle by boosting consumption and business activity.

Coming from a working class background, the president promises to focus on improving the living conditions of the most precarious and working poor by doubling the minimum wage to $ 15 an hour and eliminating social coverage at most large number.

In this crisis, as in all economic crises everywhere in the world, women pay a heavy price, recalls Sylvie Matelly, economist and deputy director of IRIS, the Institute of International and Strategic Relations:

“First of all, because that they have the lowest paying jobs.

Women earn less than men, so it is they who are most affected by the effects of the crisis.

When there is a separation in a couple, they are the ones who most often raise the children and who manage the expenses of a household.

It is still the women who occupied the front-line positions in the fight against Covid-19 and who were in sectors ravaged by the epidemic and who were often made redundant.

In

my opinion, the United States is the first country to make reference to the situation of women in its emergency plan.

"

Actions also in favor of blacks, Hispanics and Americans of Asian or indigenous origin.

It is indeed they who represent the bulk of the poor.

Joe Biden's goal is clear: to tackle growing inequalities, but also to restore confidence to the middle classes.

The very ones who had been seduced by Donald Trump.

It is a radical change in terms of social policy that the new president promises, estimates the economist, Sylvie Matelly: “ 

For thirty years we have had a pauperization of part of the population.

It mainly affected men, white, Americans, and in particular working in industrial basins in the United States.

For Republicans, and especially Donald Trump, it is foreigners' fault.

For the Democrats, we are in the logic of deindustrialisation.

In a logic of populations which have been forgotten, which could not be formed.

And therefore, the solution to remedy this is to fight rather against the inequalities which have widened, by taxing the very rich more widely and by redistributing much more.

Obviously, the political responses are radically different.

"

This new policy is at the heart of the next tax reform.

The debt of the United States

On the economic front, the Covid-19 crisis has cut the federal state's revenue and increased its spending.

As the recourse to the public deficit is massive, the public debt has risen from 108% of gross domestic product in the first quarter of 2020 to more than 127% today.

"This trend will continue under the effect of an acceleration in spending,"

said Christophe Blot, economist at the OFCE, the French Observatory of Economic Conditions.

"In light of all the recovery plans adopted and announced, public debt could reach 140% of US GDP this year, a historic high since 1870."

Is this a problem?

Not for the moment.

Part of this was bought out by the central bank, the Federal Reserve.

And to finance the colossal stimulus effort, the Fed and the country's banks have been called upon.

"The only problem that this could generate in the future is that investors fear that ultimately the United States will not honor its commitments and that they ask for risk premiums and higher interest rates for buy American debt.

But it turns out that there is a strong demand for US debt.

There are strong savings in the United States and around the world that can also fuel this demand for debt securities.

So the financing of this debt in the short and medium term does not pose huge problems, ”

concludes the economist of the OFCE.

Europeans and Chinese

Internationally, always from an economic point of view, almost everything needs to be rebuilt.

Starting with the trade war with China and the tensions with Europe.

According to Christophe Blot:

The tone will not be as sharp as the one Trump had.

In commercial matters, there will no doubt be a strong desire for appeasement.

Even if it is unlikely that Biden will reverse all the measures and tax increases that have been decided in the last two or three years.

We will be in a middle ground situation: there will probably be a more peaceful dialogue between the new American administration and the European institutions.

Sanctions against the European economy have been relatively moderate compared to what happened vis-à-vis China.

These tensions should gradually subside, even if we will not return exactly to the pre-Trump situation.

A change of tone to be expected, especially since American trade policy in recent years has not been crowned with success.

Much to Donald Trump's chagrin, China has inflated its trade surplus with the United States.

Newsletter

Receive all the international news directly in your mailbox

I subscribe

Follow all the international news by downloading the RFI application

google-play-badge_FR

  • Joe biden

  • United States