Chapman professor discusses setbacks in Biden’s fiscal policies

Professor Fadel Lawandy addresses the state of the economy and the road to economic recovery under the new administration. Graphic by HARRY LADA, Art Director

The new year comes on the heels of the 2020 economic recession caused by COVID-19, which led to the highest unemployment levels in the United States since the Great Depression. One month into President Joe Biden’s term in office, it remains to be seen what plan his administration has for economic recovery. 

This issue was the topic of discussion at a virtual event Feb. 17 featuring guest speaker Fadel Lawandy, a Chapman University professor in the Argyros School of Business and Economics. The discussion addressed the current state of the economy and postulated effects of specific policies under the Biden administration.

Based on recent data and Biden’s policies, Lawandy is not optimistic about economic recovery, stating at the event that it’s unlikely citizens can witness a “bump” in the economy due to Biden’s presidency.

“We have yet to see any immediate actions that would produce meaningful economic recovery and jumpstart the economy,” Lawandy wrote in an email to The Panther.

On the local level, cities have been providing economic assistance to local businesses through the Coronavirus Aid, Relief and Economic Security (CARES) Act.  Orange Mayor pro tem Kim Nichols told The Panther that the City of Orange has gone through three rounds of CARES Act funding, aiding local businesses with rent and other financial burdens during the pandemic. Most recently, the Orange City Council voted Feb. 9 to allocate $493,400 toward small businesses.

“We want to do anything we can to try to help,” Nichols said. “I have a small business and I’m feeling the pain myself. I understand their plight. When we get phone calls about issues that we can address, then we have staff that gets right on that.”

Andrew Travis, a graduate student in Chapman’s Executive Master of Business Administration program, had mixed feelings about Lawandy’s discussion. 

“(The event) was kind of a downer, because (Lawandy) didn’t really have a lot of positive things to say,” Travis said. “(But) it was really nice to hear some physical numbers along with the big, broad goals that the Biden administration is trying to put into place so quickly, and to see the short-term impact on the job market.”

Biden’s economic plan includes a $1.9 trillion COVID-19 relief package, with an increase in the federal minimum wage from $7.25 per hour to $15 per hour — both of which initiatives are highly contested. 

While the unemployment rate in 2020 averaged at 3.86% — an increase from the 3.68% average in 2019 — the average personal income increased by 0.6% in December 2020. Lawandy attributes this increase to the government stimulus, stating that the money allotted from the relief package entered the stock market instead of being spent on basic necessities like rent. 

“The stimulus didn’t do anything,” Lawandy said at the event. “Why? Because we were paying people checks when they might not need it.”

Economists across the political spectrum have said the stimulus should go to individuals who are unemployed in order to truly stimulate the economy. They highlight the phenomenon that financially secure individuals receiving money are more likely to save it than spend it. 

Lawandy also cited the Congressional Budget Office’s estimate of a loss of 1.4 million jobs in 2025 if economic revisions like increasing the minimum wage to $15 per hour are implemented into legislation. 

Travis is uncertain on the feasibility of a federally-mandated $15 per hour minimum wage, comparing a large and populous state, like California, to Oklahoma, where he’s originally from. 

“In the big population areas, that number is very achievable,” Travis said. “It’s something we could see being beneficial. But, there’s going to be a bigger impact on the smaller states with lower costs of living.”

Lawandy also discussed parts of Biden’s climate change agenda, specifically the revoking of the permit on the Keystone XL oil pipeline and the Biden administration’s decision to rejoin the Paris Agreement. He cited 11,000 jobs lost by the cancellation of the oil pipeline, a figure that only partially represents the impact of the executive order. 

He also addressed the expected cost of rejoining the climate agreement, arguing that the U.S. loses money and jobs while still facing the effects of climate change if it places restrictions on itself without holding other top-polluting countries accountable. 

“Yes, we’ve got to save the environment,” Lawandy said at the event. “But, if we’re going to save the environment, we’ve got to make sure that everybody in the climate accord is saving the environment.