President Joseph Robinette Biden Jr. was sworn in January 20, 2021, becoming the 46th president of the United States. At 78, he is the oldest president ever elected. President Biden promised to “restore the soul of the nation” and pleaded for unity in what has become a fractured and partly outraged nation.
If you watched what happened on January 6th, as enraged Trump supporters attacked and ransacked the capitol, then you saw firsthand the anger and division that is present in this country. How President Biden addresses this outlier group in the future will be interesting.
In his inaugural address, Biden pleaded to end the nation’s “uncivil war” and for both political parties to unite in an effort to heal the country. He said unity, with Congress working together in a bipartisan course of action, is the only way forward to confront the many great challenges facing the country now. . .including COVID-19, immediate job generation, immigration reform, climate change and other threats to the U.S. economy.
Biden used his first day in office to sign 17 executive orders, including rejoining the Paris climate accords and the World Health Organization.
An incredibly ambitious agenda
While Biden’s agenda is one of the most — if not the most — ambitious first-term dockets ever, number 1 on the list is his $1.9 trillion COVID-19 relief plan. For millions of Americans, many of their benefits have expired and a large portion of small businesses are hanging on by a thread. According to a Columbia University study, 8 million Americans fell into poverty in 2020 as a result of the virus. Any federal assistance to individuals, families and small businesses to date certainly helped, but the benefits were short-lived.
As of January 2021, the U.S. is still 10 million jobs behind where it was pre-pandemic. While some experts believe as many as 6.7 million new jobs could be created by the end of this year, the current data really does not support those numbers. There are 6 million jobs available in the U.S. and in January, only 166,000 jobs were created according to the Bureau of Labor Statistics. However, according to the same source, 379,000 jobs were created in February, an outstanding total. Even with nearly 400,000 jobs created in one month, we still have a long way to go.
How many of the 10 million or more unemployed in the U.S. are tied to the hospitality industry, which has been decimated? Also, how many businesses in the hospitality sector have closed and closed for good?
According to the World Travel & Tourism Council, if you add the job losses in the travel and tourism industry with those in the hospitality industry, as many as 9.2 million jobs were eliminated in the U.S. in 2020. There is your 10 million missing jobs right there in the hammered travel and hospitality industries!
Restoring the hospitality and travel industries to pre-pandemic levels now seems more important than ever and as of the first quarter of 2021, there didn’t seem to be an end to the agony that is apparent in those two sectors. When asked, “Where is the economy headed,” I sigh. My pat answer is, “It’s all about the virus.” If infections slow, then that’s good news. Nothing else needs to be said.
So, while Biden’s agenda is sizable, and possibly not even attainable in a single term, his $1.9 trillion COVID-19 relief plan is the first thing that needs to be done. After that, job generation and beating COVID are co-equals as the second most important items on the ledger.
After all, Biden is in an enviable position. The Democrats control the House, the Senate and the presidency. If a once-in-a-lifetime political agenda can be accomplished, this is the time to do it.
COVID-19 and job generation go hand-in-hand
In January of 2020, just days before the world woke up to a virus named COVID-19, there were 153 million Americans employed by both private and public employers. By March and April, over 23 million jobs had gone up in smoke like kindling in a bonfire. Yet, 130 million lucky Americans remained employed. Regardless, at no time in the nation’s history, even during the Great Depression, Great Recession or World War II, has the nation seen its economy nosedive at such a rate in such a short period of time.
By October 2020, six months after the nation shut down as a result of the virus, the job market had added about 13 million jobs, most of which were “work at home” assignments. Yet, by January 2021, the nation was still down 10 million jobs from pre-pandemic totals. January job numbers were revised up from 49,000 to 166,000, which was a nice surprise. The nearly 400,000 jobs created in February were an even nicer surprise. If we can keep that going for the remainder of the year, we are going to see an economy growing at a 4 percent rate, which is astounding! But when you fall as far as the U.S. did in 2020, it’s easy to post great economic numbers.
In normal times — or during the 10-year recovery after the Great Recession of 2007 to 2009 — 100,000 jobs gained per month was considered maintaining and 300,000 jobs gained was cause for celebration.
There were lots of comments by journalists and politicos regarding the paltry sum of 49,000 jobs created in January 2021 in the U.S. The best we could find — “It may look good, but it ain’t,” according to Gregory Daco, chief U.S. economist at Oxford Economics, in a story posted by CNN Business and other media assets in the winter quarter. Then again, the Bureau of Labor Statistics revised that number to 166,000 in early March.
All in all, the U.S. economy shrank by 3.5 percent in calendar year 2020, the worst performance since 1946. The economy did grow by 4 percent in the fourth quarter of 2020, but that was not enough to make up for the GDP losses in the first three quarters of the year, according to the Commerce Department.
Even more, in February of this year, the top economist in this country — Federal Reserve Chair Jerome H. Powell — said that the unemployment rate was “close to 10 percent.” The Labor Department reported in January that the U.S. unemployment rate was 6.3 percent. Powell, with his 10 percent total, was factoring in those who left the labor force and counted them as unemployed (the government does not count those who have left the workforce in its unemployment totals, meaning they are not actively searching for a job). Millions left the workforce in the United States. . .the virus essentially changed the economics of just about every country in the world beginning February 2020.
Historically, this is as important a time as ever regarding the U.S. economy
March 2020’s jobs losses were the first in the U.S. in 113 consecutive months, or almost 10 years of monthly job gains. Those 113 consecutive months of job gains that began in the summer of 2010 more than double the previous record in the U.S.
Think about that; the U.S. economy created jobs every month from President Obama’s two terms — about seven years out of his eight years — to President Trump’s one term — three years out of four. Rarely (make that never) has the U.S. seen that many months of job creation under two different presidential terms, particularly two presidents that were polar opposites in every way.
The Great Recession of 2007 to 2009 saw 8.7 million jobs lost, but the longest recovery in the nation’s history then created 22.2 million jobs. For much of the last quarter of the recovery, the U.S. was essentially at full employment. In short, there was a time from around 2015 to the end of 2019 when the South and the U.S. economy was growing about as much as it could. Then, total disaster as the virus emerged.
As of the winter 2021 quarter, with almost 10 million jobs still lost, we find ourselves in worse shape than at any time during the Great Recession. However, there was good news in February. COVID cases began to drop, not dramatically, but enough to be encouraging. Those cases slowed even more in March as more and more vaccines were given and a new one from Johnson & Johnson emerged.
So, is this a temporary economic situation for this country or one that will last much longer, even after the vaccines have slowed the virus? No one seems to know because there is still so much uncertainty about the virus, its variants, the vaccines and whether or not those 10 million unemployed that had jobs in February of 2020 have a job to come back to.
We did receive some positive speculation about the 2021 economy in the winter quarter. The Congressional Budget Office (CBO) expects the economy to expand rapidly this year. The CBO wrote that gross domestic product will increase to near 4 percent by the end of the year. That is outstanding if true, because that is well above pre-pandemic levels and represents a good start to a U.S. economic comeback.
But the CBO also went out on a limb by predicting the U.S. will reach pre-pandemic employment levels by 2024. Good luck with that prediction. It will probably take more time than that. In fact, it may take a decade or so, because when the virus emerged, the U.S. was at full employment, meaning we have a long way to go to achieve pre-pandemic job levels. Furthermore, we do not yet know the full depth of this virus’ effect on the economy.
However, there is some more good news. Deloitte surveyed CFOs in December about the economy in 2021. Nearly 70 percent of those surveyed predicted that the COVID-19 vaccine will assist in a strong recovery beginning in the middle of 2021. Two-thirds said they expect strong consumer spending in 2021, and 63 percent believe business spending will spike. The previously mentioned CBO predicts that gross domestic product will grow by 3.7 percent in the fourth quarter of 2021 (huge if true) and by 2.4 percent in 2022.
And on the jobs front? According to the J. Thelander Consulting-PitchBook survey of 200 owners of private companies in the U.S., there will be a hiring spree by the end of this year. Almost 90 percent of those business owners surveyed said they will be hiring in earnest in 2021, and that those companies would consider flexibility when it comes to work-from-home. Ninety percent? I have never heard of a poll on job generation when 90 percent surveyed said they will be hiring within the next year. Never!
Several sources are predicting that calendar year 2021 will be the biggest job generating year since records began in 1939. The data firm IHS Markit predicted in January that non-farm payrolls will increase by 6.7 million this year. Oxford Economics estimates that 5.8 million jobs will be created in the U.S. in 2021, and the University of Michigan reported 5.3 million will be added. All three projected totals would surpass the current record of 4.3 million jobs created in 1946 at the end of World War II.
So, let’s finish off 2020 and that horrible year based on some real economic data regarding our region, the American South. Surprisingly, as last year ended, the South led all U.S. regions in job recovery, creating hundreds of thousands of jobs. Even more, in the last quarter of 2020, the only net job gains in the U.S. were in the South.
Texas gained the most jobs of any state in December with 64,200. Georgia placed second with 44,700 jobs. In comparison, job growth in the Northeast, Midwest and West was nonexistent. There were no net job gains in those three regions in the last quarter of 2020. None.
Other effects of the COVID-19 recession on the economy and how they are playing out in 2021
While other aspects of the overall economy in 2020 were just a fragment away from total collapse in the first half of the year, the second half showed some legs. Yet, again, we are still short 10 million jobs from the start of the virus-based recession, and that alone is the second-most important issue among politicos and economic developers. Chopping down that large unemployed group is imperative to the Biden administration. Remember, in just over a year, the U.S. went from full employment (3.5 percent) to what the fed now says is more like 10 percent unemployment today.
Foreign investment in the U.S. is pathetic; but so is foreign investment worldwide
Foreign direct investment is incredibly important to the U.S. and the South’s economy. After all, the U.S. has been the preferred location in the world for FDI for decades, mainly because it has been a historically safe bet to invest.
The United Nations Conference on Trade and Development (UNCTAD) said in its Investment Trends Monitor report published January 24, 2021, that uncertainty about COVID, its variants and the vaccines has crushed trade among nations. The UNCTAD report said that global investment policies and the virus will continue to affect FDI flows this year, especially for developing countries.
Global foreign direct investment in 2020 fell by 42 percent from $1.5 trillion in 2019 to $859 billion. Those figures are 30 percent lower than the lows of the Great Recession. Think about that; investment by one country in another country was 30 percent lower in 2020 than during one of the worst recessions in U.S. history (from 2007 to 2009).
According to the UNCTAD, FDI dropped for the most part in developed countries during 2020. Flows fell in countries like the U.S., the U.K., Germany and Japan in 2020 by 69 percent to $229 billion. FDI flows to North America declined by 46 percent, and in the U.S., FDI dropped by 49 percent. The total inflow investments by foreign companies in the U.S. fell to $134 billion. In comparison, foreign-based firms invested $421 billion in the U.S. in 2015, an all-time record.
But this total calamity of nations trading (or not trading) with one another was not all COVID-related. In addition to the virus, tariffs implemented by President Trump through executive orders in 2017, 2018 and 2019, slammed many sectors here in the U.S.
China wins the tariff wars in a walk-off and that does not bode well, at least for now, for the U.S.
For the first time ever, China topped the U.S. as the No. 1 destination for new foreign direct investment in calendar year 2020. That is huge for China and devastating for the U.S. It means every ounce of effort the U.S. has put into reshoring over the last 20 years, has, at least for now, come up short.
Reshoring is all about bringing back the companies that left in a herd mentality for lower cost locales such as China and elsewhere in Asia in the 1980s and beyond. The U.S. could not compete with those countries for labor costs during that time. Now it can, as it has become so much more competitive over the last 10 years.
Foreign investments in China rose only 4 percent in 2020, while they dropped almost 50 percent in the U.S. in 2020. So, regarding FDI, it wasn’t China taking off with new investments to top the U.S. for the first time, but rather the U.S.’s FDI data falling off a cliff.
How we got here regarding foreign investment flows to the U.S.
Trade among nations is the poster child of globalization. Former President Trump campaigned prior to winning election in 2016 against globalization. He led an “America First” economic development policy, including a go-it-alone tariff and protectionist effort. Biden, on the other hand and for the most part, is a free-trader.
When Trump launched the tariffs, China reciprocated with tariffs of their own, crippling parts of the U.S. economy, especially the agribusiness sector. It was a tit-for-tat disaster in the midst of an economy that was very strong when President Trump took office.
The COVID-19 crisis that shut down businesses in early 2020 occurred just after the Chinese ban on agricultural products in the U.S. This was a significant hammer blow to U.S. farmers, creating a double whammy to the world’s largest suppliers of food — U.S. farms.
Trump said repeatedly that China was paying for the tariffs. That was not true. The U.S. businesses that were operating and importing products from China were paying for the tariffs, not the People’s Republic of China.
While Trump’s goal was to tariff various countries — particularly China — in an effort to relocate manufacturing plants and other businesses to the U.S. to get around the tariffs, the plan failed miserably. The global supply chain has taken decades to forge. It cannot be greatly affected in just three or four short years, even by the U.S., the largest economy in the world.
However, the virus has indeed disrupted supply chains. There is an effort to reduce liability as a result of future global economic shocks such as COVID-19. Just what that effort will look like remains to be seen.
U.S. farming and those pesky, obliterating tariffs
Many farmers, citing a lack of customers, were forced to plow under their crops (throw them away) because in the summer of 2019, there were few if any customers. China officially cancelled all purchases of U.S. agricultural products, including soybeans. It was a short, dark time; a stain, a blemish on the United States’ economic policy regarding China and what we sell them every day, every week, every month and every year.
China is the nation’s No. 1 consumer of U.S. agriculture products by a long shot, and soybeans grown in the U.S. — and purchased by China — account for 65 percent of the sales of that crop worldwide. The Chinese move to tariff our products exported to them was in retaliation for President Trump’s pledge to slap 10 percent tariffs on $300 billion worth of Chinese imports.
While Trump’s tariffs failed to reshore a significant number of manufacturing plants to the U.S., there is little question that the virus will likely have a significant effect in time on reshoring to the U.S. The days of importing incredibly important components like semiconductors from China, Taiwan and elsewhere to the U.S. are numbered, and for good reason.
A study by the U.S.-China Business Council (USCBC) that came out in January 2021, claimed that former President Donald Trump’s trade policies, particularly with China, cost the U.S. 245,000 jobs in his only term. The source said the policies were based on antiquated ideas on how trade actually works. Look for President Biden to lift many of the tariffs and other trade impediments Trump enacted while in office. U.S. trade policies will look quite different under Biden.
To see foreign direct investment in the U.S. decline to such low levels hurts the South’s economy more so than any of the other three regions. Why? In some years, the South captures as much as 65 percent of FDI in the U.S., particularly in the manufacturing sector. Think Samsung, Toyota, Airbus, Royal Dutch Shell, Honda, Hyundai, Nestlé, Mercedes-Benz, BMW, GlaxoSmithKline, BASF, Bridgestone, AstraZeneca and Maersk, all of which are huge foreign-owned employers with massive operations in the South. FDI is so much more important to the South than any other U.S. region only because it is the region of choice for more foreign-owned firms.
Comprehensive immigration reform: Biden is going to give it a shot
Another of this nation’s most pressing political issues is immigration reform. Reform of our immigration laws hasn’t been addressed by Congress in more than three decades. In fact, if anything, the last four years have seen only anti-immigration reform. We can do better than that because (1) unless you are native to these shores, we are all immigrants and (2) even immigrants who have been here for a relatively short time are an incredibly important part of the nation’s economy.
Want proof? It is estimated that 97 percent of immigrants in this country — legal and illegal — participate in the workforce, and most are not even eligible for federal or state benefits. In fact, many of the 10 million or so undocumented immigrants in the U.S. are somehow pulling off melding into the workforce and are paying for future benefits such as Social Security or Medicare. Thing is, while they may be paying for these benefits, they can’t use them.
Maybe the fact that most immigrants in this country cannot tap unemployment or other benefits is why there are such a large percentage of them who not only work, they have to work! According to the Pew Research Center, the U.S. is home to over 10 million unauthorized immigrants. But, those same illegal immigrants represent 26 percent of farm labor and 15 percent of construction labor in the U.S. In Texas alone, about 50 percent of construction labor is made up of unauthorized immigrants. Two-thirds of them have been in the U.S. for more than a dozen years.
On the other hand, born-and-raised Americans have a worker participation rate of only about 64 percent. The rest are on some kind of federal or state assistance. That 36 percent of people who are not part of the workforce can receive benefits only because they were born here.
But there are so many more important reasons why we need to facilitate immigration reform, which includes increasing legal immigration. An important reason: fewer babies were born in 2020 than at any time in the nation’s history. The record before that was 2019. Our fertility rate for women age 15 to 45 is the lowest on record.
So, Millennials are not having kids. Why? Most people of childbearing age do not believe they can afford children. (Those 30 to 35 years old are an exception.) It gets worse. In 2018, on average, 10,200 people retired each day in this country, while 2,230 people turned working age (16 years old) each day according to the Census Bureau. That’s a loss of 8,000 people from the workforce each day!
From what I have read, hardly anyone realizes this “silver tsunami” is upon us. What’s a silver tsunami? It’s when workers age out of the workforce, try and sell their homes, yet a smaller replacement group cannot fill their jobs or buy their homes.
On top of the silver tsunami is another tidal wave. For four years under the Trump administration, U.S. policy curbed immigration by the hundreds of thousands. In 2019, only 200,000 legal immigrants entered this country, when over the past 10 years that number averaged over a million. So, when this nation needs it the most, a tight labor force of American-born workers is not being bolstered substantially by a workforce that is foreign-born.
The ramifications of being unable to replace your workforce are huge. Less taxes are paid into the system. Because of fewer taxes, the benefit structure for older Americans — such as Social Security and Medicare — will ultimately fail unless massive stimuli are created and targeted to those two programs.
Furthermore, a recent study by the Wharton School of Business at the University of Pennsylvania showed that the reduction of H-1B visas — a Trump implemented policy — will send jobs offshore and will reduce innovation.
Sending high-skilled H1-B workers back home to their country of origin will benefit other countries such as India and China. Under Trump, denial rates for H-1B visas increased from 6 percent in fiscal year 2015, to 32 percent in fiscal year 2019, according to the National Foundation for American Policy. In short, if corporations operating in the U.S. cannot recruit high-skilled workers here, they will go elsewhere to find them.
President Biden has already addressed immigration reform. He wants to create permanent protection for young immigrants known as “Dreamers” in the Deferred Action for Childhood Arrivals (DACA) program. Biden proposes that Dreamers can immediately apply for permanent legal residency.
Biden also has a pathway to citizenship for the 10 million immigrants that are here illegally. The president has proposed an eight-year pathway to citizenship for the undocumented. This is exactly the opposite of Trump’s immigration policies, which included child separation and mass deportation.
These changes in immigration policies from the restrictive measures implemented by Trump will satisfy an important promise Biden gave Latino voters. Mexico President Lopez Obrador has suggested to Biden to give dual nationality to Mexicans working in the United States.
So, we have about 10 million undocumented immigrants in this country and most are not paying taxes locally, statewide or federally. They are already here. Why not make them citizens and add millions to the tax rolls? They are already here and they may even be employed by you. Without immigration, can the U.S. economy grow? No, it cannot, considering the demographics we have seen over the last decade.
Conclusion
Compared to previous administrations, the agenda of this one is immense, from ending COVID-19, to massive job creation, to infrastructure, to stimulus, to healthcare, to climate change to other broad, across-the-board issues.
Do you know how much those things would cost in addition to Biden’s $1.9 trillion stimulus plan that is proposed? There are not enough zeros on your calculator.
Remember, Joe Biden is nearly 80 years old. In my lifetime, I have never seen such a grand or considerable political agenda for a president. Someone else will have to pick up the mantle if these things are to move forward in the future.
However, there are four items on this administration’s list that can be achieved in one presidential term. They are:
1. Re-establish free trade or something close to it.
No, your job has not been eliminated or added because of free trade. That trade policy adds and eliminates jobs every day in this country. Free trade — or close to it — embraces competition. It not only embraces competition, it encourages it.
If the U.S. is to be competitive, we cannot throw in a tariff ringer to win. We simply have to be competitive, and the South is as competitive as it has ever been in both manufacturing and services. The South is as competitive as China, period.
End the tariffs! They are artificial. Trump’s tariffs have done nothing for our citizen’s pocketbooks other than to take from them, much less this nation’s coffers.
2. Achieve total immigration reform for all.
We must address and fix the immigration issue in this country. Immigrants are good for our economy, even those who are here illegally. The previous administration did not agree that immigrants are good for the U.S. economy.
In fact, the previous administration essentially “dismantled” the U.S. immigration system, which was the easiest way of cancelling — or essentially ending — immigration as we knew it.
Several in the new Biden administation have gone on record saying they have to start from scratch with regard to immigration. “The prior administration dismantled our nation’s immigration system in its entirety. When I started 27 days ago, I learned that we did not have the facilities available or equipped to administer the humanitarian laws our Congress passed years ago,” said Secretary of Homeland Security Alejandro Mayorkas at a White House press briefing in January. Let’s pass immigration reform so immigrants can be taxed like the rest of us! Even more, those who disagree must at some point realize that America is a multi-ethnic, diverse democracy and that is not going to change.
3. and 4. Create jobs and end COVID, or end COVID and create jobs!
The third goal for Biden’s administration is to get this economy going, which may happen naturally if we can achieve the fourth goal — ending or at least snuffing out this horrible disease that is COVID-19.
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