Joe Biden has been elected to be the next president of the United States. Now he’ll have to get creative.

When the president-elect takes office, he’ll confront the country’s two most acute challenges: an ongoing COVID-19 pandemic and the economic damage it’s wrought. But he’ll have an uphill battle to enact the sort of bold policy agenda that many supporters were hoping for.

Barring a January surprise in Georgia’s runoff election, Republicans are likely to retain control of the Senate, denying Biden the unified control of government that his predecessors enjoyed when they came into office. With traditional relief and stimulus measures limited by opposition party intransigence, Biden might still be able to pass policies designed to resuscitate the stricken service sector directly.

The US economy has bounced rapidly back since April, but only partially. Employment has only recovered about halfway to where it was before COVID-19 struck, giving it the shape of a reverse square-root sign.

Lower-wage employees, who tend to work at the local services businesses most deeply impacted by the virus, are suffering more.

The economy is being afflicted by two simultaneous maladies. The first is continued fear of the virus, now in the middle of a devastating third wave. Fear, more than lockdowns, has kept Americans shut inside their homes, reluctant to take the risk of going out to shop or eat. That in turn gives rise to the second problem of decreased demand, which filters through the entire economy.

Fear of the virus will eventually be reduced by vaccines, which may become available in early 2021. A national program of testing and contact tracing -- which President Donald Trump long resisted -- would also help speed COVID-19 on its way out, and should be a priority for the incoming administration. But even when the virus is gone, the economy is likely to remain depressed for a while, as the overhang of unemployment works its way out of the system.

Bold relief measures, of the type that sustained Americans through the pandemic’s dark early days, probably won’t be forthcoming given the Republican Senate’s inevitable turn toward austerity. The same is true of traditional fiscal stimulus, such as a burst of infrastructure spending, that might help boost demand back to normal levels. But there might be a chance for more targeted measures to help the sectors of the economy that COVID-19 has hurt the most -- local services.

Restaurants, shops and other establishments that cater in person to customers have gone bust in large numbers. After the threat of the virus has passed, the US government might try to resuscitate local economies by subsidizing new shops to fill the empty storefronts that now dot America’s urban landscape. Some of these new establishments would be run by the same owners whose businesses went under during the pandemic, while others would be run by enterprising newcomers. But all would be able to draw on the local pool of unemployed, most of whom were working in these same types of businesses in 2019.

Subsidizing new local businesses would accomplish several goals at once. It would put people back to work at jobs they know how to do, and start pumping demand through the ecosystems of local economies. It would help prevent cities’ commercial retail space from being riddled with unsightly boarded-up vacancies -- a blight that hurts viable businesses next door. And it would help sustain and preserve the small business class.

This last aspect might make local business formation subsidies attractive to Republicans in the Senate; small business people are a reliable Republican constituency. Additionally, this policy would be highly targeted; the subsidies could last only until a town’s existing commercial vacancies had been mostly filled, limiting the cost of the program and avoiding the appearance of handing out money at random.

Strict free market adherents might worry that this plan would delay or prevent needed transformation in the US’s industrial mix. The pandemic has shifted demand from local services to e-commerce; people are watching Netflix instead of going to movie theaters, and ordering things off of Amazon instead of buying them in stores. Some will question whether reversing that shift should be an economic priority.

But the benefit of quickly and cheaply resuscitating local US economies far outweighs the danger of slightly delaying the evolution to a more online future. In fact, local business formation subsidies will simply accelerate a move that’s already in place; new business filings have been above trend since August, as entrepreneurs take advantage of cheap rents and labor. The local economy is restoring itself already -- it could just use a push to get the job done faster.


Noah Smith
Noah Smith is a Bloomberg Opinion columnist. -- Ed.

(Bloomberg)