Joe Biden clearly learned a few important lessons during his eight years as Barack Obama’s vice president.
Obama, like Biden, became president amid crisis. When Obama took office in 2009, the economy was reeling from the 2008 financial crash, with repair work only just beginning. Obama’s first big move was shepherding the 2009 relief bill, an $800 billion stimulus package that Congress passed less than a month after Obama took office.
Biden’s American Rescue Plan took a bit longer to enact, but at $1.9 trillion, it’s more than twice the size of the Obama stimulus. It also comes after two prior relief plans, pushing the total amount of fiscal stimulus during the last year to nearly $6 trillion, an unprecedented sum. Most members of Congress, Democrats and Republicans alike, would have laughed Obama out of Washington had he called for that much spending back in 2009.
Biden has the benefit of some crucial learnings from the Obama recovery. First, it was way too slow. It took three and a half years for real GDP to return to pre-recession levels and six-and-a-half years for employment to reach prior levels. The Federal Reserve spent years trying to goose the economy with monetary stimulus, but there was little additional help on the fiscal side from Congress.
That creeping recovery had staggering consequences for Obama’s presidency, and the whole country. Obama began with Democrats controlling both chambers of Congress, but they lost the House of Representatives in the 2010 midterm elections—an outcome Obama described as a “shellacking.”
Obama ran an effective campaign in 2012 and soundly beat Republican Mitt Romney. But Dems never regained control of Congress, and in 2014 they lost the Senate, which doomed Obama’s 2016 nomination of Merrick Garland to the Supreme Court. The jobs recovery picked up by 2016, but suspicion over Democrats’ handling of the economy may have contributed to Hillary Clinton’s loss in the presidential election, leading to four years of President Donald Trump.
Many economists think one explanation for that weak recovery was a one-and-done approach to fiscal stimulus in 2009, combined with excessive concern about pushing up the national debt. There has been remarkably little griping about the massive amount of deficit spending this time around, even from Republicans who once branded themselves as deficit hawks. Biden and his fellow Democrats are exploiting that to max out the federal credit card and flush money into every corner of the economy they can.
This almost certainly will speed the recovery, compared with more modest stimulus. Economists think real GDP will grow 7% this year, which would be the fastest pace of growth since 1984. Obama never got a post-recession surge, with real annual GDP growth during his tenure maxing out at 3.1% in 2015.
Consumers today have gobs of savings and the Biden relief bill will top that off. Spending could skyrocket this summer if Covid vaccines let consumers start returning to normal. Treasury Secretary Janet Yellen predicts lost jobs will mostly return by next year, which would be four years faster than the Obama jobs recovery. There’s always a chance something could go wrong—excess inflation, new coronavirus variants—but if you were in Biden’s shoes, you’d want all this stimulus, too.
There are important differences between the Obama and Biden economies. Obama inherited a crash that caused profound damage to the financial system and the housing market that was going to take years to repair, no matter what. Biden’s timing is luckier. He took office with COVID-19 vaccines ready for primetime and the worst economic damage in the past. President Trump’s calamitous post-election subterfuge may also have gifted the Senate to Biden’s Democrats, via the long-shot wins by two Dems in the Georgia Senate runoffs in January. Without that, any 2021 relief plan would have been a fraction of what Biden signed into law on March 11.
Obama also accepted a slightly smaller bill in exchange for three Republican votes in the Senate, making it a "bipartisan" bill. He got little to nothing for that. Biden isn't playing that game. He's talking up bipartisanship but obviously happy to sign strictly partisan legislation instead of wooing Republicans, who probably aren't wooable anyway.
Obama was actually more popular than Biden two months in, with a 60% approval rating, compared with Biden’s 53%. But Obama’s popularity waned and was only around 45% when Republicans clobbered Democrats in the 2010 midterms. That reflects the slow economic improvement in 2009 and 2010, which disappointed voters. Biden, by contrast, is aiming for a hot economy as the midterms approach. That’s no accident, since he was there for one shellacking and doesn’t want another.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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