A2| Thursday, December 3, 2020 THE WALL STREET JOURNAL.
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The yuanhas been appreci-
ating since June. A Page One
article Wednesday about Presi-
dent-elect Joe Biden’s eco-
nomic team incorrectly said
China’s currency has been de-
preciating.
Attorney GeneralWilliam
Barr on Tuesday said the Jus-
tice Department hasn’t found
evidence of widespread voter
fraud that could reverse the
election’s outcome. The head-
line on a U.S. News article
Wednesday about Mr. Barr’s
remarks incorrectly indicated
that he said there was no evi-
dence of voter fraud.Banco do Brasil’s name
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de Brasil in a World Watch ar-
ticle Wednesday about a bank
robbery in Criciúma, Brazil.The official Estes Park,
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Our newspapers are 100% sourced from sustainably certified mills.GOT A TIP FOR US? SUBMIT IT AT WSJ.COM/TIPScovery to date is in part
thanks to hefty, bipartisan
aid. The $2.2 trillion Cares
Act and several other stimu-
lus bills together exceed the
aid enacted during Mr.
Obama’s administration. Pol-
icy makers learned from the
2008-09 crisis “that it is criti-
cal to do something large,”
Jason Furman, an economic
adviser to Mr. Obama, wrote
this week in Foreign Affairs.
Yet while the economy is
in better shape than what Mr.
Obama faced 12 years ago, itis far from home free. Some
economists say the current
surge of infections and re-
strictions on activity could
stall activity just as Mr. Biden
takes office.
Meanwhile, he inherits far
less in the way of policy tools.
In Jerome Powell, Mr. Biden
will be aided by a Fed chair-
man as eager to help as Ben
Bernanke was then. But Mr.
Powell is largely out of am-
munition. Short-term interest
rates are already close to
zero, and long-term rates areCAPITAL ACCOUNT|By Greg Ip
Biden Economic Repair Job Lacks Some Tools
Joe Biden
has been here
before. Twelve
years ago, as
Barack
Obama’s newly
elected vice president, Mr. Bi-
den inherited an economy
laid low by a once-in-a-cen-
tury crisis.
The good news is that, un-
like then, the recovery from
the pandemic-driven eco-
nomic contraction is under
way, and with vaccines about
to be approved, an end to the
latest crisis is in sight. The
bad news for Mr. Biden is
that while he and his team
want to accelerate the recov-
ery, they may not be able to
do much about it. Monetary
policy is largely exhausted,
and fiscal policy is at the
mercy of Congress.
In 2009, Democrats con-
trolled the House and Senate.
If Republicans win at least
one of two runoffs in Georgia
next month, they will retain
control of the Senate, where
they will likely take a harder
line on deficits than they did
under President Trump.
The emphasis Mr. Biden
has placed on the recovery
can be seen from who he has
asked to steer it. If confirmed,
Janet Yellen would be the
first practicing economist to
serve as Treasury secretary in
two decades. She has spent
her career in academia and
government, including as
head of the Federal Reserve,
studying and managing the
balance between unemploy-
ment and inflation.
Today, it is clear which is
the priority. Like the financial
crisis 12 years ago, “The pan-
demic and economic fall-
out...have caused so much
damage for so many,” she
said Tuesday. “It’s essential
that we move with urgency.
Inaction will produce a self-
reinforcing downturn causing
yet more devastation.”W
hen Mr. Biden took
office in 2009, the
recession had been
under way for a year and
would last five more months.
Economic output was 5% be-
low its potential. Unemploy-
ment had topped 7%, on its
way to 10%.
By contrast, the pandemic-
induced recession probably
ended last spring. The econ-
omy is operating at about 3%
below potential, and unem-
ployment has dropped from
14.7% in April to 6.9% in Octo-
ber. The crisis is far from
over, with infections and hos-
pitalizations at or near re-
cords, but several vaccines
have proved effective in trials
and could be widely available
by midyear.
The strong economic re-under 1%. By contrast, in
2008-09 they were around
3%, enabling the Fed to push
them lower through large-
scale bond-buying.
Mr. Biden faces other ob-
stacles neither Mr. Trump nor
Mr. Obama did. In 2009, “we
got complete cooperation
from the outgoing adminis-
tration,” Mr. Furman said in
an interview. President
George W. Bush, at Mr.
Obama’s request, asked Con-
gress to release $350 billion
of bailout funds that Mr.
Obama used to rescue banks
and car manufacturers.
By contrast, Treasury Sec-
retary Steven Mnuchin said
he will wind down market-
support programs funded by
the Cares Act on Dec. 31 and
told the Fed to return around
$430 billion in unused funds.
Trump-appointed regulators
are rushing to privatize Fan-
nie Mae and Freddie Mac,
which could weaken the sup-
port their mortgage guaran-
tees provide to the housing
market.
The same low interest
rates that have left the Fed
out of ammo make fiscal
stimulus more affordable and
potentially more potent. The
holdup isn’t the financing, it
is the politics. Mr. Furman
wrote that the Cares Act
didn’t reflect another lesson
from 2009, that “responses todisasters need to be long-last-
ing.” The law’s support
largely expired after four
months, leaving “a paralyzed
Congress and president un-
able to agree on action.”W
hile another eco-
nomic collapse is un-
likely, economists
project more stimulus would
hasten the drop in unemploy-
ment, minimizing the harm to
workers’ long-term incomes
and job prospects.
Republicans are open to
more stimulus, just not as
much as Mr. Biden’s team is
likely to think sufficient. Hav-
ing blessed a ballooning defi-
cit under Mr. Trump by vot-
ing for steep tax cuts and
spending increases, Republi-
cans are pivoting to fiscal
rectitude just as Mr. Biden
takes the reins.
“The Republican Party is,
fundamentally, a small gov-
ernment party,” said Jon Lie-
ber, an analyst for Eurasia
Group and former aide to
Senate Majority Leader Mitch
McConnell. “Trump’s contri-
bution was to make deficits
great again. Now that he’s out
as leader of the party, that
underlying policy commit-
ment [to small government]
rises up again.” If Republicans
retain the Senate, “It’s going
to be really hard to do any
legislation.”2015 ’20 ’2468101214%
Actual
Without
stimulus
With
stimulus‡Unemploymentrate†Theeconomy,thoughrecovering,isstilloperatingwellshort
ofitsproductivepotential,andfreshstimuluscouldspeedup
thedeclineinunemployment.Source: IHS Markit (unemployment); WSJ analysis of Congressional Budget Office
and Bureau of Economic Analysis data (output)*Shortfall between actual vs. potential economic output given available labor, capital and technology.
Assumes 4% growth, annualized, in the fourth quarter of 2020. †Figures are seasonally adjusted
quarterly averages, 2021-2025 are projections. ‡Assumes $1,200 stimulus checks, extended and
enhanced unemployment benefits.2000 ’05 ’10 ’15 ’02%Outputgap*
RECESSIONKelly (D., Ariz.) was sworn in
after winning a special election
Nov. 3, defeating Republican
Sen. Martha McSally.
Three Republicans are op-
posed to Ms. Shelton’s nomina-
tion. If Mr. Kelly votes with all
Senate Democrats and indepen-
dents, who are opposed, she
would lack the necessary sup-
port for confirmation so long
as all the 51 opposing lawmak-ers are able to vote.
A Nov. 17 procedural vote to
advance Ms. Shelton’s nomina-
tion failed, 47 to 50, due to the
absences of two GOP senators
who would have voted in her
favor, Rick Scott of Florida
and Chuck Grassley of Iowa.
They were absent due to coro-
navirus-related precautions.
Two other Republicans, SusanCollins of Maine and Mitt
Romney of Utah, voted against
the confirmation, as did all the
chamber’s Democrats and in-
dependents.
Senate Majority Leader
Mitch McConnell, who sup-
ported Ms. Shelton’s confirma-
tion, changed his vote to “no”
to preserve the ability to bring
up the nomination later.
Republicans also could try to
confirm Ms. Shelton in the next
term of Congress should they
win two Jan. 5 runoff elections
for Senate seats in Georgia.
If Ms. Shelton isn’t con-
firmed, President-elect Joe Bi-
den would be able to fill the
vacancy after that.
Ms. Shelton has been a
longtime proponent of a return
to the gold standard, which
would limit the Fed’s ability to
influence inflation and employ-
ment. Republicans voiced mis-
givings over her public state-
ments and writings, including
a notable shift away from fa-
voring tighter monetary policy
that some said indicated op-
portunism as she sought to se-
cure President Trump’s favor
for the nomination.Senate Republicans’ bid to
confirm Judy Shelton as a
Federal Reserve governor ap-
pears unlikely to succeed now
that a new Democratic senator
has been seated, denying Pres-
ident Trump’s nominee the
votes needed for approval.
The Senate voted Wednes-
day to advance the confirma-
tion of another of Mr. Trump’s
Fed nominees, Christopher
Waller, the research director
at the Federal Reserve Bank of
St. Louis. The Senate voted
50-45 to clear a final proce-
dural hurdle before Mr. Wal-
ler’s confirmation vote, which
is likely to occur Thursday.
Mr. Waller, whose term
would run through January
2030, has attended meetings
of the Federal Open Market
Committee this year in his ca-
pacity at the St. Louis Fed. He
headed the University of Notre
Dame’s economics department
before joining the regional Fed
bank in 2009.
Republicans’ majority in the
U.S. Senate fell to 52-48 on
Wednesday when Sen. MarkBYNICKTIMIRAOSFed Candidacy Likely Hits
Dead End With New Senator
Judy Shelton
already is
opposed by
three Senate
Republicans to
beaFed
governor.©Photograph: patriceschreyer.comVilleret
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