Joe Biden's 5 biggest economic challenges

1. Beat the pandemic

Most economists agree that until the coronavirus pandemic is contained, US President-elect Joe Biden will struggle to rebuild the economy. As soon as he takes office on January 20th, the Democrat has promised to assemble a new coronavirus taskforce. Boosted by the announcement of the Pfizer-BioNTech vaccine, which has 90% efficacy, Biden will be able to reassure American voters of light at the end of the tunnel, if, as is widely expected, he announces a second nationwide shutdown.

One of Biden's coronavirus advisors, Michael Osterholm, has warned that the US is headed for "COVID-hell" due to the virus still spreading exponentially. On Thursday, the US recorded a new daily record of 150,000 infections, pushing the overall total past 10.4 million. Osterholm predicted that a 4-6 week nationwide lockdown would bring infections right down until the vaccine can be distributed.

Several US states and cities have already imposed their own restrictions but the new lockdown plan faces resistance from Republicans who have opposed a tougher response under outgoing president Donald Trump. Mississippi Governor Tate Reeves has vowed that his state will not comply with any strict new curbs and says the president doesn't have the constitutional authority to issue a nationwide lockdown order.

2. Limit the economic damage

More than 44 million Americans were temporarily laid off during the first wave of the pandemic in the spring. More than a quarter of those made redundant had their jobs culled permanently, as the shutdown sparked a wave of bankruptcies. 

Biden now faces the prospect that within days of taking office, a second lockdown would spur a fresh wave of layoffs. Major sectors of the economy — events, aviation, tourism and hospitality — remain in deep trouble and would likely need an additional bailout.

Worse still, a second coronavirus relief bill has been deadlocked in Congress since the summer and is unlikely to be agreed upon before the end of the year. Even if both sides can agree, the bill would still need to pass the Senate, which, depending on the result of runoff elections in Georgia, may continue to be controlled by the Republicans, who are calling for more targeted stimulus spending.

Biden's Emergency Action Plan to Save The Economy, which was published during the campaign, promises to encourage work-sharing to prevent layoffs while boosting unemployment benefits. The plan also called for further stimulus payments similar to the $1,200 (€1,010) paid to 160 million Americans earlier this year, while boosting grants and loans targeted at small businesses.

Despite those promises, Biden will struggle to ensure that the financial aid arrives on time. During the spring lockdown, several states found it difficult to process the huge numbers of claims for unemployment insurance and stimulus checks were delayed, with some not reaching the recipients until August.

3. Spend in the right ways

Biden has already pledged an almighty push to reopen the US economy and insists that new domestic spending must come before he enters into any new international trade deals.

The Build Back Better blueprint is worth $7 trillion over the next decade, to be spent on huge infrastructure projects to help tackle climate change, boost education, health care (Obamacare), and affordable housing.

Some $2 trillion is proposed to slow global warming by making power plants, vehicles, public transport and buildings more fuel-efficient and less dependent on fossil fuels.

While the plan has been welcomed by unions, Republicans have dismissed the huge spending commitments as a form of socialism which they say would kill jobs in the energy sector while loading taxpayers with the bill.

Republican lawmakers have also indicated that after hiking the national debt by trillions of dollars earlier this year to tackle the pandemic, the need for fiscal responsibility is urgent.

4. Undoing Trump's policies

Biden has promised that the US will quickly rejoin the Paris Climate Agreement, the international pact agreed in 2015 to limit global warming. Climate skeptic Trump pulled out of the accord six months after taking office.

Read more: Biden pledges to restore US global cooperation and leadership — but can he?

However, not all of Trump's policies will be as easy to undo. The Democrat's aggressive plans to tackle climate change will require a more steady oil price, which will help renewable energies to be cost-effective. This could affect how he deals with Iran and Venezuela, upon whose oil exports Trump reimposed sanctions. Trump's cozy but controversial relations with Saudi Arabia will likely need to be maintained.

A Biden administration will almost certainly seek to rebuild US relations with major trading partners including China and the European Union, who Trump targeted for protectionist policies including tariffs and sanctions. But the president-elect will have to juggle the urgent need to boost international trade with a promise to voters, particularly in the economically depressed so-called Rust Belt states, to restore US manufacturing hegemony.

Read more: What will a Biden presidency mean for Brexit and 'Global Britain'?

Again, Congress could put a spanner in the works of his Made in America plan, which will offer tax breaks for US multinationals who return their production from overseas.

5.Cost of the pandemic

A Democrat-controlled Senate will also be necessary to reverse some of $1.5 trillion in tax cuts to help pay for Biden's huge spending plan. The president-elect plans to raise taxes on those earning more than $400,000, as well as increasing corporate taxes from 21% to 28%.

The tax hikes would also impact the way wealthy families transfer assets to heirs, while capital gains would almost double to nearly 40% for those with more than $1 million in income.

The proposals would almost certainly need to be watered down in the event of a Republican-controlled Senate or in the case of a tie where each party holds 50% of the seats.

The lack of support would likely scupper Biden's spending plans, threatening the strength of the economic recovery.