The economic crisis the US is currently facing is not new for the President-elect Joe Biden.
During Obama’s administration, Biden was in charge of supervising the implementation of the $787 billion American Recovery and Reinvestment Act. He prevented any fraud and wastage in the allocated funds meant to support the American people.
President Obama has reportedly said that they called him by the nickname of ‘Sheriff’ in the White House because nobody could misuse taxpayer dollars under his watch.
However, experts believed that in the effort of ensuring the dollars were not being misused, they ended up spending slower than required and in turn prolonging the recession.
Even though initiatives like the Payroll Protection Program have resulted in fraud, Fed Chair Jerome Powell approved of this plan because he believes funds should be distributed as quickly as possible to counter the economic crisis, even if it results in a few cases of fraud.
According to Moody’s Analytics, the highest returns on the government’s investment are gained through food stamps and unemployment insurance programs. These funds are spent instantly and returned to the economy.
Law and economics professor at Rutgers University School of Law advises that if funds are provided to individuals and households directly, a few of the hurdles can be avoided including the concern that firms were misusing the funds.
He further explains that the process of distributing funds in the Recovery Act were delayed because it was not directly distributed to the people.
According to economists, the most challenging task for Biden will be to get another stimulus package approved from a Republican-majority Senate. Biden might be appointing his top economist, Jared Bernstein in the Cabinet.
Analysts advise that Biden should learn from the past recovery models that have been developed.
The director of the Indiana University Public Policy Institute makes the comparison that Biden’s promise to develop American manufacturing infrastructure and more productive capacity is similar to ‘Manufacturing USA’ in 2012.
Many economists are concerned about the worsening condition of government finances, which was another contributing factor in the slow recovery during the last recession.
At the beginning of the pandemic, the president and Republicans blamed the Democratic states, which were the hardest hit by the virus, for mishandling their budgets.
However, now the virus has spread across the country to even Republican states. This could be a motivating factor for them to address the public health crisis and provide more stimulus and relief.