Presidential administrations never stay the same from beginning to end. Top personnel come and go for various reasons, and we seem to be seeing that now with the Joe Biden administration. Bloomberg News recently reported that the White House’s top economic adviser, Brian Deese, is expected to depart next year as director of the National Economic Council. There’s speculation that Cecilia Rouse, chair of the Council of Economic Advisers, will leave next year as well.
For Biden, these departures are potentially welcome news. His administration’s economic policy desperately needs an overhaul after adjusting too slowly to a new reality that threatens both the health of the economy and the president’s reelection chances in 2024. When he took office, Biden and his team assumed they would be dealing with the same economic challenges that plagued recent predecessors, especially a jobless recovery. (This happens when jobs growth is sluggish despite more robust gains in gross domestic product.)
This was part of a larger economic trend that some economists had dubbed secular stagnation. Savings rates around the world, but particularly in Asia, were on the rise, and so was risk aversion. The global glut of savings gravitated toward haven-like assets such as US Treasuries. The large inflows into dollar-denominated assets drove up the value of the currency, which made imports more affordable for American consumers. The result was an economy in which it was cheap to borrow but difficult to find productive investments that did not face the threat of lower-cost foreign competition. The solution was to print more dollars and increase US competitiveness via deficit-financed corporate tax cuts.
