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February 10, 2021

The Obscure Issues Biden Must Address

There's more in heaven and earth than pandemic response

 

We've run out of semiconductors like this one. (FeatureChina via AP
Images)

The Chief

For most of the existence of First 100, I have focused on two things:
the vaccine rollout, and Joe Biden's $1.9 trillion American Rescue
Plan. There's good reasons for that. The vaccine has given hope for
the end of a pandemic that has dominated American life for a year, with
44.4 million doses

into arms, and the rescue bill comprises the sum total of legislative
policymaking at the moment, as well as the critical signal of the
trajectory of the Biden era in domestic policy.

It's been appropriate to target our focus there, especially because
that's what Biden has been doing. And Biden is moving toward a novel
conception of economic management, about which I'll have more
tomorrow. But presidents have a host of other responsibilities that go
beyond one bill or one implementation, however important. There's been
a trend among liberal wonks to see themselves as macroeconomists, and
attention inevitably gets pulled there. But there's more to life than
the macro-economy.

Biden has taken some tentative steps on immigration and foreign policy,
but in a number of key areas, the laser focus on the pandemic has
crowded out important decisions that eventually the president and his
team will have to make. Here's a sampling of the lingering issues that
need addressing:

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Supply chain: When not smugly discussing kids on Reddit, the big story
in the business world is a giant semiconductor shortage, which so far
has hit the auto industry the hardest. General Motors has had to roll
back production

until the middle of March
,
along with other major car companies. Ford estimates it will lose $2.5
billion
from
the delay; the total industry losses could be as high as $61 billion.
That translates into a lot of idled factories and lost manufacturing
jobs. It should not surprise you that other industries use computer
chips as well, and could see their own slowdown
.

The shortage is being blamed on unexpected demand during the pandemic,
which has made it difficult for carmakers to spin up production and find
enough chips. But as many as 70 percent of all semiconductors come from
Taiwan
,
and that kind of dependency is unhealthy and prone to disasters like
this. Rebuilding domestic manufacturing capacity was a Biden's
campaign promise, though largely confined to the medical supply chain.
But it's about far more than facemasks.

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Financial speculation: You know about GameStop, but I've written about
how this just scratches the surface

of the Wall Street casino. These special purpose acquisition companies
(SPACs) in particular, which are companies with no revenue and no
product that exist to buy other companies and take them public without
disclosure of their financial statements, have gotten completely out of
control. There are so many SPACs now that insurance companies that
protect directors and officers against liability are overloaded
.
Colin Kaepernick has a "social justice" SPAC

now.

These are just moneymaking schemes

for the lead sponsors, and could easily be used to bilk ordinary
investors through inflated valuations of junk companies. They're
taking risky venture capital plays and putting them on public markets
,
with investors taking all the risk. And we're already seeing the first
hints of fraud in the markets, as Chamath Palihapitiya's SPAC
purchased Clover Health without disclosing an active Justice Department
investigation . What will
financial regulators do about this? The SEC just gave its Enforcement
Division subpoena power
;
it's time to use it. More broadly, this rampant speculation will
surely come to a bad end, and Biden's team needs to get out in front
of it before it spreads to Main Street.

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Small business: An interesting paper from the Economic Innovation Group
showed that 2020 featured a startup surge
,
with business applications up 24 percent year-over-year. That's unlike
most recessions, and the significant safety-net assistance provided to
families allowed the laid off and those with shuttered businesses to try
something new. But there's a downside here; most of these "startups"
were single self-employed individuals unlikely to hire employees. And
with 9 million businesses at risk
of
failure in the pandemic, a number worsened by the sluggish initial
vaccine rollout

and new variants threatening another lockdown, these new businesses
being formed might not be enough to replace the old ones.

Unless we want market consolidation everywhere and the associated harms,
Biden's team must figure out how to keep businesses likely to hire
workers afloat, and access to capital would really unlock that. Related
to this, the Consumer Financial Protection Bureau's acting director,
career employee Dave Uejio, outlined in a memo to agency staff

that he would target banks who only took Paycheck Protection Program
applications from existing customers, saying that this "may have a
disproportionate negative impact on minority-owned businesses." CFPB has
jurisdiction over fair lending in small business loans; banks could be
in big trouble.

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Local government: We keep hearing these stories about the improved
fiscal outlook for state and local governments
,
presumably obviating the need for any federal relief. But it raises a
question: if revenues are so good, why have cities and states cut so
many jobs
?
Job loss is running at about 7 percent in state and local government,
while revenues are down only 1.6 percent in the last fiscal year.
What's the disconnect? Why are four times as many jobs being lost
relative to revenues? Is it the increased costs from COVID measures? An
unequal recovery from the pandemic leading to higher social service
spending? The lack of in-person schooling? It's something Biden's
economic team needs to understand.

Housing: Just keeping people housed in the pandemic is critical; the
inadequate eviction moratorium

isn't protecting enough people, and mortgage relief is about to expire
.
Moreover, the debt overhang

on rent and mortgage payments is a huge factor, one that we saw stunt
recovery in the last recession. Implementing rental assistance programs
so people can actually get relief is the biggest under-the-radar
challenge of the Biden administration. And beyond the immediate crisis,
the future of housing finance

and housing affordability loom, requiring more building but also a
better method for wealth building than a volatile asset critical to
sustainability like shelter.

And also: Are we going to find a source of ongoing infrastructure
spending besides the gas tax
?
Can farmers be persuaded to become part of the solution on climate
change
?
Should we discourage Big Oil mega-mergers
? Will
Biden close a loophole that enables for-profit colleges to prey on
veterans with GI Bill money
?
What changes will regulators make to debt collector practices
?
How will a trade dispute among South Korean battery makers

disrupt the effort to electrify the U.S. fleet?

These are critical questions that won't all be solved in one bill or
through better vaccine distribution. There's a whole presidency out
there.

What Day of Biden's Presidency Is It?

Day 22.

We Can't Do This Without You

Today I Learned

* Vaccinations hit 2 million people

one day last weekend, which is a good barometer of our growing capacity.
(Kevin Drum)

* The belief is still that herd immunity won't come until Thanksgiving
,
which I think neglects the level of natural immunity in the population.
(Daily Beast)

* Community health centers will become another vaccination site
,
targeting harder-to-reach populations. (CNBC)

* Case rates and hospitalizations are falling, and here's a theory why
, though the
rise of more transmissible variants will likely overcome this soon.
(Twitter thread)

* Quietly, the Biden rescue plan has the biggest overhaul of health
insurance

since the Affordable Care Act, mainly through much higher subsidies.
(Axios)

* At least publicly, Chuck Schumer isn't giving up

on including the minimum wage in the relief bill. (Wall Street Journal)

* Biden's pullback in Yemen really does hang on your definition
of
"offensive operations." (The New Republic)

* Biden plans to keep the U.S. Embassy in Jerusalem
.
(Roll Call)

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