- President-elect Joe Biden will go through a complicated transfer of power while the US economy struggles to deal with efforts to tackle COVID-19, economist Mohamed El-Erian told CNBC.
- El-Erian said Biden’s administration should not look at COVID-19 fiscal policy simply as a relief bill, but should address four major objectives to secure a sustainable recovery.
- Biden should make clear that citizens must not get hung up on whether economic relief is pro-work or non pro-work, since fiscal policy should be aimed at broader long-term issues, he said.
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Joe Biden will face a complicated transfer of power at a time when the US is faced with a rising cases of COVID-19 and an economy that is slowing down, Mohamed El-Erian, chief economic advisor at Allianz, said Monday.
“This is not 2008, where we were also in a crisis and the incoming Obama administration worked very closely with the outgoing Bush administration to understand quickly what was going on and react,” El-Erian told Bloomberg. “This may be a difficult transition.”
El-Erian said the next few months will be important for Biden in terms of tackling efforts to recover from the pandemic, or risk playing “even more catch-up.”
Last week Federal Reserve chair Jerome Powell once again called on the government to do more to help the economy, warning that the nation was in danger of repeating the mistakes of the 2008 financial crisis.
El-Erian said Biden’s administration shouldn’t view fiscal policy simply as a relief bill, but must seek to address four objectives that produces a vibrant market-based economy:
1. US citizens should receive economic relief, in the form of stimulus checks and payments, as they’re hurting through no fault of their own. Nearly 67 million unemployment insurance filings have been made since COVID-19 slammed the US economy in March. That surpasses the 37 million filings made during the 18-month Great Recession.
2. Expenditures on critical resources such as test-and-trace and hospitalisation equipment are required to beat the virus, because it’s unlikely to disappear for at least the next six to nine months. Over 56,000 people are currently hospitalized with COVID-19 complications in the US, an increase of 10,000 since October 30.
3. The government must acknowledge the issue of scarring, where short-term problems drag into long-term ones. El-Erian said the risk of economic loss faced by workers and households must be addressed by making sure demand isn’t damaged.
4. The world is de-globalizing, which means there’s a rising pressure on productivity, El-Erian said. The US is facing a K-shaped recovery, in which the wealthy are recovering and the lower-earning are not. The challenge of more corporate concentration should be another one of Biden’s focal points, he said.
Making sure that the next stimulus relief is not viewed as pro-work or non pro-work could help the US achieve a sustainable path to COVID-19 recovery, El-Erian said.
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