UNIDENTIFIED PERSON, BYLINE: NPR.
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CARDIFF GARCIA, HOST:
Hey, everyone. Stacey and Cardiff. This is THE INDICATOR FROM PLANET MONEY. Well, folks, we have a new president. It's Inauguration Day.
STACEY VANEK SMITH, HOST:
We do have a new president. Joe Biden was sworn in as the 46th president of the United States at noon today. And his presidency begins with a lot of uncertainty hanging over the economy. With the pandemic still raging, there are nearly 10 million fewer jobs than before it started.
GARCIA: And as for President Biden's economic agenda, his proposals, there are two parts to it, as he said in a speech last week.
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PRESIDENT JOE BIDEN: A two-step plan of rescue and recovery. A two-step plan to build a bridge to the other side of the crisis we face to a better, stronger and more secure America.
GARCIA: The rescue part of the plan is targeted at supporting people and businesses that are still struggling while the pandemic is going on - more money for local governments and small businesses, for unemployment insurance and those $1,400 checks to individuals.
VANEK SMITH: And the second part of the Biden agenda, the recovery part, is targeted at helping the economy in the long term once the pandemic is finally behind us.
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BIDEN: Infrastructure, manufacturing, innovation, research and development and clean energy - investments in a caregiving economy and skills and training needed by our workers to be able to compete and win in the global economy of the coming years.
GARCIA: Just how much of the Biden agenda will actually get passed after it's negotiated in Congress, and whether the agenda will succeed if it does get passed, is just still too early to know. But there are questions that we can already start asking about how to measure the Biden agenda's success in the coming years.
VANEK SMITH: So today on the show, we're going to give you three of them, plus the indicators to follow in order to answer those questions right after the break.
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GARCIA: OK, three questions about the Biden economic agenda. Question one - will the U.S. labor market get back to where it was before the pandemic? The indicator we'll be watching to answer this question is simple - 3.5%. That was the unemployment rate about a year ago, right before the brutal COVID recession.
VANEK SMITH: And it's easy to forget now because it seems so long ago, but that 3.5% unemployment rate was the lowest unemployment rate in half a century.
GARCIA: But now the unemployment rate is 6.7%, and the labor market is actually worse than even that number implies because the unemployment rate doesn't count people who have given up looking for jobs, either because they had to stay home to take care of kids or relatives or because they got discouraged.
VANEK SMITH: And hopefully a lot of those people will start looking for jobs and getting them in the coming months and years as the economy reopens. And if the unemployment rate can get back down close to 3.5% again, or maybe even lower than that, it will be a sign that the labor market has recovered.
GARCIA: And there's a lot riding on this. A strong job market leads to other favorable trends. For example, before the pandemic, households of all incomes and backgrounds, including all racial and ethnic backgrounds, were getting raises, decent raises. Income inequality was falling, as a matter of fact. And the poverty rate had gone down for five straight years. That's all largely the result of a tight labor market, a strong labor market. And so that is the question that we're going to be asking. Question one - will the labor market make a comeback?
VANEK SMITH: Question No. 2, how much will the Biden administration reverse parts of the Trump economic agenda? There are a couple of different indicators that we will be paying attention to.
GARCIA: First up, taxes.
VANEK SMITH: Yes.
GARCIA: Remember that before the pandemic, the most significant economic legislation that was passed during the Trump years was the Tax Cut and Jobs Act, which had been passed at the end of 2017. And there was a lot in that bill, but maybe the most important part was a big cut in the tax rate paid by American corporations.
VANEK SMITH: Yes. So the corporate tax rate went from about 35% of the money corporations made each year all the way down to 21%. That was a major overhaul of the tax code. So that is the number that we are going to be following because President Biden campaigned on raising the corporate tax - not all the way back to where it was before President Trump took office, but, you know, higher than it is now.
GARCIA: The other indicator we're going to be watching to see how much the Biden agenda undoes the Trump agenda is about the trade war with China. The Trump administration raised the average tariff on Chinese imports to the U.S. from about 3% to more than 19% last year. Will those tariffs go back down? That's the question we're asking.
VANEK SMITH: And the answer is not necessarily or at least not immediately. For now, President Biden has only said that he is going to consult with allies - other countries in Europe and Asia - about how to deal with China.
GARCIA: And keep in mind that right now, there actually is still a lot of bipartisan support in the U.S. to continue being tough on China. And China itself is viewed very unfavorably in a lot of countries that are allied with the U.S. That's largely because these countries believe that China did a bad job of handling the outbreak of coronavirus, which originated in China before spreading out. So there is a chance that the trade war with China will continue, and an easy way to see if it does is to follow the average tariffs on Chinese imports and check to see if they stay roughly where they are.
VANEK SMITH: And finally, question three - how much money will the federal government borrow as part of the Biden economic agenda? So far, the Biden administration is communicating that it is comfortable borrowing more money through the Treasury market to finance its spending plans.
GARCIA: And here's one of the arguments that the Biden administration is making. It's saying that now is actually an appropriate time for the government to be borrowing more money in order to provide economic stimulus and investments. For example, here's Janet Yellen, President Biden's pick for Treasury secretary, during her confirmation hearing on Tuesday.
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JANET YELLEN: But right now, with interest rates at historic lows, the smartest thing we can do is act big.
GARCIA: Here's what Janet Yellen means - because interest rates are so low, Yellen is arguing that it is cheap for the government to pay back that debt, so that the government should borrow money now to boost the economy. The national debt going up, therefore, at least for a little while, won't be a sign of failure to the Biden administration, it'll just be a sign that it is pursuing its goals.
VANEK SMITH: So here at THE INDICATOR, we are going to be watching the national debt-to-GDP ratio. This ratio compares the amount of money that the government owes to the value of everything the economy produces in a single year. During the Trump years, the national debt-to-GDP ratio has gone up from roughly 75% to where it is now, which is close to 100%.
GARCIA: And a big amount of the rise in the debt was because of the money that was spent in response to the COVID recession. But even so, that is the highest amount of debt as a share of the economy since just after the Second World War.
VANEK SMITH: And here is why we'll be watching the national debt-to-GDP ratio closely. There has been a fascinating debate within economics in recent years. A lot of economists have become more comfortable with the federal government running up higher debts, saying it is not as dangerous as economists once believed. But other economists disagree. They worry, for example, that running up too much debt will lead to much higher inflation, or that it will lead to interest rates going way up if the investors who lend money to the government start getting nervous.
GARCIA: And with the national debt now forecasted to go higher than it's ever been as a share of the economy, we are going to get a chance to find out who's right. So either way, it's going to be a fascinating experiment to watch - and that is what we plan to do. We'll be watching. Feel free to watch along with us.
VANEK SMITH: More indicators TK (ph).
GARCIA: That's right.
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GARCIA: This episode of THE INDICATOR was produced by Jamila Huxtable and fact-checked by Sam Sai (ph). THE INDICATOR edited by Paddy Hirsch, and it is a production of NPR.
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