You think that social inequalities, the healthcare system, the Covid epidemic and global warming will be the main preoccupations among US citizens when electing their next president? Then think again! As in previous presidential elections, economics will be the determining factors for 8 electors out of 10 and, more specifically, the presumed capacity of each candidate in providing a response to the country’s fear of losing its standing in the world.
It therefore comes as no surprise that the programmes announced by the Democratic candidate Joe Biden and the Republican Donald Trump both intend to boost the economy, even if the Federal deficit deepens as a result. On the other hand, they clash over the methods of reinvigorating the economy. Joe Biden plans to increase public spending, whereas Donald Trump is promising to cut taxes.
Donald Trump puts himself forward as an alternative to the elite which is cut off from the people and incapable of providing protection against globalisation, while Joe Biden presents himself as the rampart against inequality and the inherent “laissez-faire” supporter among the liberals.
Key takeaways from Joe Biden’s programme: a typically social-Democrat menu
In true social-democrat tradition, Joe Biden plans to raise personal and corporate taxes, to fund increased spending on infrastructure, education and healthcare and to introduce a wage subsidy scheme inspired by the German model.
He is targeting the richest 5% of households, particularly the top 1%. For those lower down the ladder, the Democratic candidate is promising to increase the minimum hourly wage to $15,to support the spending power of the lowest-paid earners. Other propositions in favour of the middle class could follow.
In terms of infrastructure spending, the Democratic candidate plans to renovate millions of buildings, with a total climate plan budgeted at $2 trillion over four years, and achieve carbon neutrality in electricity production by 2035.
He is also proposing to invest $100 billion to modernise schools and $50 billion to repair roads and bridges. This expenditure would provide strong support for growth. According to a 2015 report, every dollar spent on infrastructure injects $2.2 into the economy through a multiplier effect[1].
Joe Biden also proposes support for the manufacturing sector by spending $400 billion on US-made products and by investing $300 billion in research and development in electric vehicles and artificial intelligence. This “Buy American” theme is a partial response to Donald Trump’s “America First”.
What will be the final cost of this programme for Americans? In total, spending would increase by almost $5 trillion, and would be offset by only $3.5 trillion of additional tax receipts[2].
A Biden-Harris administration would probably also move towards stricter regulations in the technology sector and improved commercial relations, notably with Europe.
Key takeaways from Donald Trump’s programme: an extension of 2016
Donald Trump’s economic programme is vaguer, based on a repeat of the same themes as in 2016. The “Make America great again” from 2016 has simply become “Keep America great” and implies that a heavy dose of commercial mercantilism and regulatory liberalism will be added to tax cuts.
One thing is certain. The incumbent president has undertaken to pursue the 2017 tax cuts and purely and simply cancel employee contributions between August and December 2020, which had been suspended by presidential decree.
If he remains as attached to an increase in infrastructure spending, if he is re-elected, he will once again need to negotiate with a Republican majority which is opposed to this increase.
Donald Trump seems to have put the idea of rescinding the Obama healthcare reform on hold, having failed to do so during his current tenure due to the health crisis.
As a staunch climate sceptic, he will undoubtedly maintain his current environmental policy.
Lastly, on the commercial front, he is likely to continue 'waging war’ against China (and undoubtedly also Europe), in response to growing fears of national security issues and increasing US dependence in strategic industries.
Liberal in terms of regulations but protectionist in terms of trade, Donald Trump’s programme is the same as the one which won him power in 2016, when he played on fears of American's power in the world, and anger against globalisation, multiculturalism and immigration. With an employment rate beneath the lows of the 2009 recession, this year’s health crisis will only have rekindled fears of deterioration of America's global position.
[1]CBO (2015) “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014”
[2]According to the CRFB, President Biden’s tax plan would raise $3.35 - 3.67 trillion over 10 years. From Understanding Joe Biden's 2020 Tax Plan (http://www.crfb.org/papers/understanding-joe-bidens-2020-tax-plan)