Biden aides see March 2021 rescue package as initial economic buffer against omicron
WASHINGTON - White House officials are carefully watching the economic impact of the latest coronavirus surge, as concerns mount both at home and abroad that surging caseloads could again lead to restrictions that hurt growth and jobs.
At this point, Biden administration officials have not requested additional federal funding as the omicron variant rapidly spreads. And they are optimistic that the March 2021 stimulus package provides policymakers with the financial flexibility to mitigate the economic damage that might be caused by the new variant.
At a White House event on Wednesday, Biden sought to emphasize how far the economy had come, stressing its resilience and growth.
"Today, America is the only leading economy in the world where household incomes and the economy as a whole are stronger than they were before the pandemic, even accounting for price increases," the president said.
Still, many economists are watching the latest surge, particularly on the East Coast, with some alarm.
A few weeks ago, Mark Zandi, an economist frequently cited by the White House, was projecting that the economy would grow at a breakneck pace of 5% in the first quarter of 2022. As the omicron variant spread, however, Zandi revised his growth estimate down to 2%. Now he thinks odds are uncomfortably high that the economy may in fact contract at the start of next year.
"It feels like things have started to turn," Zandi said, pointing to recent weakening in credit card spending, travel and restaurant bookings. "Omicron is having an impact."
Zandi's unease reflects the broader uncertainty that economists inside and outside the White House are grappling with as the administration tries to understand the hit that surging covid cases could deliver to the U.S. economy.
For most of the summer and fall, the White House has been consumed by one central economic threat - inflation - as rising prices proved an enormous political challenge with the U.S. economy snapping back from the early days of the pandemic. But omicron threatens to revive fears about economic risks, with signs emerging that consumer demand may start to fall as high case counts and the highly transmissible variant threaten to wreak havoc in key sectors of the economy.
Already, analysts are warning of potential hits to restaurants and bars, the travel industry, hotels and entertainment venues. The NHL, for instance, announced it would become the first major sports league to suspend play this month. And the precedent set abroad appears disquieting, as the United Kingdom entertains new restrictions on economic activity amid an enormous increases in cases there. The Netherlands, Germany and other European countries have also announced major new restrictions. The U.S. restaurant industry is pushing the administration for additional relief.
"The problem is soon going to be growth, not inflation, given omicron. It looks like it's going to do real damage," Zandi said.
White House officials emphasize that the relatively strong economic growth and low unemployment heading into this winter should buffer the American economy from the head winds of omicron. More than 200 million Americans have been vaccinated and the unemployment rate has fallen to 4.2%, much earlier than expected. And many health officials think the variant could run its course by February, at which point the economy may recover quickly.
Deputy Treasury Secretary Wally Adeyemo has pointed to the state and local funding provisions in the American Rescue Plan, which experts say dramatically improved the financial outlook for local governments across the country.
The administration has faced substantial criticisms for that program, enacted in March, with even some Democratic economists arguing it was excessive. White House press secretary Jen Psaki said Tuesday that the administration does not believe it needs to ask Congress for additional emergency funding to respond to omicron. But given the likely difficulty in getting a narrowly divided Congress to approve more relief money, administration officials believe the existing state and local funding could prove to be a safeguard for a potential downturn caused by omicron.
The $1.9 trillion rescue plan included hundreds of billions of dollars in money for schools, child-care centers and other programs that are not set to be spent until beyond this year, providing a potential buffer.
"If you look at state coffers at the moment, state and local governments have money in them that will allow them to address this variant," Adeyemo told The Washington Post this week.
Other economists stress that the economy has held up relatively well in the face of prior variants of the virus, such as delta. Jason Furman, who served as a senior economist in the Obama administration, pointed out that more than 2,000 people died of the virus per day on average in January, February and March 2021. Through that period, the economy still grew at an annualized rate of 6.3%.
The stakes for the president are high. CNN reported Tuesday that Biden's rating on the economy among the public is the worst of any president at this point in his tenure since at least 1977. The president's economic agenda has also stalled amid a dispute with Sen. Joe Manchin, D-W.Va. The expansion of the child tax credit approved by Democrats earlier this year - which has delivered monthly payments to tens of millions of American families - is set to expire without further action, which could deprive families of a key buffer against a financial downturn.
And even if omicron fades away, the prospect remains of further variants that continue to disrupt the U.S. economy as much of the world remains unvaccinated.
"People are talking about the height of omicron and saying it should taper off at some point. But what's next if people aren't vaccinated? We'll continue to get variants," said Kristen Broady, a fellow at Brookings Metro, a Washington D.C.-based think tank. "We need to focus on ending the pandemic, otherwise almost nothing else matters because we'll keep losing thousands and thousands of Americans a day."
Certain sectors are already seeing the impact. Data from OpenTable, which tracks restaurant reservations, shows "some really big negative numbers" in Seattle, New York City, Philadelphia and Cleveland, said John Lettieri, chief executive of the Economic Innovation Group, a bipartisan research and public policy organization. Several cities went from having restaurants at roughly 30% extra capacity to having close to 75% unfilled capacity, a drop that applied across different cities and regions.
The Independent Restaurant Coalition has already been pushing the administration to endorse congressional legislation to replenish a fund for restaurants created as part of the American Rescue Plan.
"There's still a ton of uncertainty, but we are seeing what could be the beginning of a serious dip," Lettieri said. "The data is so uniformly pronounced and sizable a shift that, if it were to continue, could spell significant trouble. But, at least so far, the new variant seems to have burned out relatively quickly in other countries."