Mr. Biden says the federal government shouldn’t shy away from adding to a sea of red ink if it helps turn the economy around.
“By acting now, even with deficit financing, we can add to growth in the near future,” he said in Wilmington, Delaware on Friday. “In fact, economic research shows that with conditions like the crisis today — especially with low interest rates — not taking action will hurt the economy, scar the workforce, reduce growth and add to the national debt.”
Mr. Biden has endorsed a $908 billion compromise coronavirus relief plan being negotiated on Capitol Hill and said a “grim” November jobs report requires further action.
“Any package passed in the lame-duck session is not enough. It’s just the start,” he said. “Congress will need to act again in January.”
The U.S. economy added 245,000 jobs in November as the unemployment rate dropped to 6.7% from 6.9% in October.
The job gains were the fewest in months and well below analysts’ expectations of about 450,000.
Janet Yellen, Mr. Biden’s pick to be the next Treasury secretary, said it’s vital to move with “urgency” given the twin crises of COVID-19 and the related economic fallout.
“Inaction will produce a self-reinforcing downturn causing yet more devastation,” Ms. Yellen said.
It was music to the ears of liberal economists and former Obama advisers, who agree that deficits don’t matter in the near term.
Pete D’Alessandro, an adviser to the 2020 and 2016 Bernie Sanders campaigns in Iowa, said it was heartening to hear from people like Ms. Yellen on the Biden team.
“It’s a hell of a lot better to at least hear the people coming in saying, ‘Well, wait a second — we don’t necessarily have to just cut, cut, cut, cut, cut and we actually have to do the opposite to get ourselves out of this,’” Mr. D’Alessandro said.
Mr. Biden also tapped Neera Tanden, president of the Center for American Progress, to be the next White House budget director.
Though Ms. Tanden has attracted scorn on the left for her past feuds with Mr. Sanders, some activists said it could have been worse.
Alexandra Rojas, executive director of the liberal group Justice Democrats, said Ms. Tanden wasn’t progressives’ first choice but that she’s better than installing someone who would immediately pivot to tackling the debt.
“Tanden’s on the record over the past several years pushing back against nonsensical worries about the deficit,” Ms. Rojas said.
Liberal economists are increasingly embracing the notion that the debt and deficits should not be a primary concern in the broader discussion about growth, particularly given the current state of the economy amid the coronavirus pandemic.
“It may turn out to be different in the future, but we need to think about fiscal policy in the context of the idea that deficits are a necessity for achieving the goals of full employment and financial stability — and quite possibly very substantial deficits,” said Larry Summers, a top economic adviser during the Obama administration.
Mr. Summers teamed up with Jason Furman, another former Obama economic adviser, to write a new discussion draft paper arguing that full employment might not be possible with “overly restrictive” fiscal policy, given historically low interest rates.
Regardless of future plans, the public health crisis has helped accelerate government spending and worsened a debt and deficit crisis that had already been spiraling out of control.
The federal government’s $3.1 trillion deficit for the fiscal year that ended Sept. 30 is more than twice the previous record, which was set during the George W. Bush and Obama administrations in the aftermath of the 2008 economic crash.
President Trump nicknamed himself the “king of debt” during the 2016 campaign and said then that he planned to wipe out the entire national debt over his would-be eight years in office.
Instead, federal debt held by the public was more than $21 trillion at the start of fiscal 2021. That’s about a $7 trillion increase compared to when Mr. Trump took office and is the biggest jump in a single presidential term in American history.
The Peter G. Peterson Foundation, a fiscal watchdog group, released a survey this month that found more than seven in 10 voters say their concern about the national debt has increased over the past several years and that Congress should spend more time addressing it.
Michael A. Peterson, the group’s CEO, said voters are well aware that Mr. Biden and the new Congress will face a range of “complex and urgent” policy challenges.
“While defeating the pandemic and restoring our economy remain our pressing priorities, Americans are also calling for their leaders to address our unsustainable and dangerous fiscal outlook,” Mr. Peterson said.
Congressional Republicans like Sen. Lindsey Graham of South Carolina, the potential incoming Budget Committee chairman, now say they’re ready for a return to fiscal restraint.
“You’re beginning to see them change their attitudes on spending with the prospect of [an] incoming Democratic president,” said Matthew Continetti, a resident fellow at the American Enterprise Institute. “They’re beginning to back off on some of the large deficits, or at least their rhetorical support or willful blindness toward these deficits that they exhibited over the last four years.”
Democrats say Republicans aren’t being sincere and that they hope Mr. Biden will ignore their pleas.
“Maybe we’re not going to be so hell-bent on working with these people that we go into an austerity government. You at least have that hope,” Mr. D’Alessandro said.
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