The presidential election is (almost) over, and sorting through the new directions under President-elect Biden has begun. There are still some votes to be counted (or recounted), litigation to be dealt with, and protocols to be followed before the election is officially certified, but it’s highly unlikely that results will shift.
From an economic perspective, it is rare that presidents move the needle much on economic growth. Historically, the economy has fared moderately better in Democratic administrations, but the difference, while statistically significant, is small and not necessarily caused by the president. In terms of policy, the ability to implement major initiatives will depend on the outcome of the two senate races in Georgia, which will determine which party has a majority. (The Democratic Party lost some seats in the House of Representatives but maintained the majority there.)
Clearly, the first and foremost thing to be dealt with is the coronavirus. There has been some good news regarding progress toward a vaccine, but case numbers and hospitalizations are higher than ever. The economic crisis is the direct result of the health crisis, and we cannot fully revive the lost jobs and output until we have an effective strategy with regard to the pandemic.
It appears that President-elect Biden will properly focus more directly on a better response. However, calls for sweeping shutdowns and other highly restrictive mandates should be approached with caution. The U.S. economy is recovering, but a major shutdown would be devastating, causing financial duress and wreaking havoc on mental health and wellness. While targeted restrictions may be essential in many places, a broad-based lockdown would cause immense harm. Greater encouragement of basic safety measures is already forthcoming from the president-elect, which experts agree can have major positive consequences.
A second issue worth noting relates to uncertainty. Nothing inhibits investment and risk-taking in the economy more than unpredictability. Uncertainty also inhibits purchasing, and about 70% of the U.S. economy is driven by consumer spending during normal times. I anticipate that there will be greater clarity and consistency going forward, which could be a positive factor. The initial response in the financial markets is quite positive.
I would sum up by noting that the dichotomy created by virtually every poll during the election between the virus and the economy was incorrect. The economy can only be restored through a concerted health response. At the same time, the health response should be examined through the lens of its potential to lead to indirect harms, which could be avoided. It will be a balancing act, but research into promising advances in vaccines and therapeutics is ongoing in laboratories and universities across the country and, indeed, the world. Stay safe!
Economist Ray Perryman is president and CEO of The Perryman Group, an economic research and analysis firm based in Waco. He was designated Texan of the Year by the Texas Legislative Conference in 2012.