Policy positions and the effects on the economy
With an election less than one week away, most citizens remain in the dark about the important policy positions of each candidate. Yes, hundreds of millions of dollars have been spent flooding the airwaves about the elections and the candidates, but most of these advertisements remain focused on the reasons NOT to vote for a candidate. Instead, many tough questions remain unanswered about the policy positions and the candidate’s beliefs. As was painfully noted in the first presidential debate, moderated by Chris Wallace in Cleveland Ohio, there was not a clear policy position that was either stated, implied or could be heard, by the audience. The second debate offered some information, yet the American citizens need information so that they can vote intelligently.
Both mainstream political parties have their position papers and party platforms on their respective websites. But even then, candidates are notorious for talking out of both sides of their mouths, and even though you may see a policy statement in writing, it is often turned on its head when the candidate starts to articulate their personal views. With so many 24-7 news outlets, and countless citizen journalists spewing rhetoric on the internet, what can you truly believe. The adage of “after all, it was on the internet” cannot and should not be sacrosanct. But what are the short-term and long-term consequences of this upcoming election. In an effort to save the time, agony and having your eyes glaze over, the following is an objective look at what policy positions each candidate brings to the election, and more importantly, examines possibilities of various outcomes.
Prefix
First and foremost, the financial markets have, long ago, analyzed, polled, and considered the effects of different election outcomes, and the consequences each might mean for the future of economic policy. So, this paper is NOT a blueprint on how to get rich in the market, as the market speculators have a monopoly on that technique. Rather, it is a high-level analysis of ECON 101 based on simple economic and geopolitical theory.
In short, a Trump or Biden win, when paired with a divided Congress, would yield little in the way of major economic policy changes, perhaps other than a slimmed down COVID-relief bill. Under this scenario, a President Trump/Biden might have to focus their efforts on making policy changes in areas where the executive branch has significant unilateral power, such as trade policy, foreign policy and appointing cabinet members, judges and regulators. Therefore, unless either party can dominate both the executive and legislative branch, neither party will screw up the economy due the institutional checks and balances!
The current political pollsters do not have a scientific crystal ball, but many political pundits DO NOT think that any one political party will sweep the House, Senate as well as the White House. However, if it were to occur, it is wise to anticipate that a “Democratic sweep” would facilitate the most far-reaching and significant changes to fiscal policy. This scenario, if it played out, could create an opening for the end of the filibuster in the Senate, and could lead to higher taxes on the wealthy and corporations, as well as major new spending initiatives on public health, infrastructure and a slew of other areas. It is also believed that a Democratic sweep could also create a scenario in which a significant (>$3 trillion) COVID-relief bill would have the highest probability of becoming law in an attempt to prop-up economic and financial market conditions. Betting markets are increasingly pricing in an additional fiscal stimulus, although it will probably not come before the end of 2020, the odds of it coming at some point in the next couple quarters are on the rise.
A look at policy
It is important to keep this backdrop of political, economic and market opinion in mind while looking at each candidate’s policy. It helps to give a more holistic look at the election, showing that the presidency alone cannot change the dynamic of the country. Nevertheless, the following is a snapshot at some of the key issues in this election and where the candidates line up.
Economy
A Candidate’s ideas and views on economic policy are of paramount importance in any election cycle. However, the policy position is even more important given the Coronavirus pandemic induced recession.
The first thing that either of these candidates must deal with, after their induction, would be their plan to reopen the economy. President Trump has spent the last few months pushing and campaigning for an aggressive and full economic reopening. He wants the states to open up as soon as possible to help accelerate the recovery process. Under a Trump administration a push for opening would be highly likely, along with a predictable and continuing spike in Covid-19 cases. Former Vice President Biden, on the other hand, has a much more cautious plan for reopening of the economy. Lockdowns would most likely continue for a couple extra months, under a Biden presidency. Vice President Biden has often said that he will follow the science and would put the health and safety of the American people over economic recovery. Under a Biden administration lockdowns and slow opening would be highly likely.
Since the COVID-19 outbreak, Trump has signed legislation to flush the economy with trillions of dollars in onetime aid to businesses, individuals, and local governments. He has also supported further stimulus measures, including payroll tax cuts, however, Congress was unable to agree upon further aid in the form of another stimulus for taxpayers before the election and this is unlikely to come until early 2021. Former Vice President Biden has proposed trillions in spending to create new jobs in clean energy, manufacturing, infrastructure, caregiving, and in programs and in other programs aimed at easing racial economic inequality. Vice President Biden wants to also offer local governments and households more support to get through the shutdown.
Taxes have been a point of serious disagreement between these two candidates throughout all of the election. President Trump’s 2017 tax cuts have served as his shining achievement. He has proclaimed those “supply-side theory” cuts as an example of his approach to stimulating economic growth. The Trump campaign has said that cutting payroll taxes put more money in people’s pockets, and therefore stimulate the economy by boosting “net paychecks” of most working Americans. A Biden tax plan seems to be the antithesis of this policy. The former Vice President has openly criticized the same tax plan that the President boasts. Biden has said that the 2017 tax cuts are responsible for the growing wealth gap in America and generally apply only to the wealthy, and do not do enough for middle class America. Biden’s plan would be a partial reversal of these tax cuts, with a raise in the marginal tax rate on the highest income earners back to 39.6%, from 37%.
The Trump campaign is attacking the policy of raising taxes while the economy struggles to recover. He has also said that a raising of the minimum wage would stifle small business recovery. Biden, on the other hand, supports raising the national minimum wage to $15 an hour from $7.25, and expanding some tax credits for lower-income workers, as his economic advisors feel that it will promote the “rising tide lifts all boats” theory.
Trade is most certainly an important issue in this election. A trade war with China, a controversial North American Trade Agreement, and other topics have become hot button issues in recent years. In a return to a core issue of his 2016 presidential campaign, Trump is telling voters he wants to boost domestic manufacturing. He says America’s difficulties in procuring medical supplies internationally during the pandemic are a national security reason to encourage U.S. companies to avoid offshoring. Trump has not shied away from instituting tariffs on other countries and has clearly entered into a trade war with China. Biden has proposed his own made-in-America manufacturing plan in July. He pledged to spend $700 billion on American-made products and industrial research, which he said would give at least 5 million more people a paycheck during a job-killing pandemic. Biden criticizes Trump’s tariff war with China as “bad for US consumers and farmers”.
Investment, research, and innovation in green technology has become increasingly important during this election as the climate and new technology has become ever more prevalent. The president’s green investment has been very conservative and been one based on deregulation. He has not introduced any major plans or subsidies. He advocates more spending on infrastructure such as U.S. roads, bridges, and airports. He also has sung his praises for electric cars, but with all of his singing, has not yet introduced any policy or other initiatives to boost the industry. This is a stark contrast when compared to Vice President Biden’s green investment plan. Biden’s plan, which is said to cost $2 trillion over the next 4 years, focuses on jobs as well as the environment. The investment and incentives associated with green technology are a centerpiece for the former Vice President Biden, which he says will create millions of jobs and move the U.S. closer to a carbon free future.
Big Tech
Big tech will almost certainly see scrutiny during the next couple of years. Both sides of the political spectrum, while they might have different reasons, have a bone to pick with the major social media companies, such as Facebook, Twitter, and Google/ YouTube. It has become clear to many, that there is something fundamentally wrong with the way that social media platforms are being handled. From censorship, the cancel culture, false narratives of the citizen journalist to the lack of decency in the Telecommunications Decency Act, these platforms have turned against the American people.
In a second term, President Trump and his appointees likely would maintain, and possibly accelerate, the broad-scale regulatory scrutiny of technology companies that marked his first term. That effort has included allegations of anticonservative bias online, antitrust investigations of internet giants such as Alphabet Inc.’s Google and Facebook Inc., and actions against Chinese-owned apps such as TikTok and WeChat. Vice President Biden, the Democratic nominee, has also been critical of Big Tech’s market power. He and running mate Senator Kamala Harris say they would support stricter antitrust oversight and online privacy rules. But the Biden camp has emphasized forcing social-media companies to better police their sites against false information, than unilaterally taking government action.
Sadly, the idea of a hands-off approach, when it comes to social media, is no longer a viable option. With these platforms being so important to the framework of American society, both sides have agreed that they cannot be treated the same as other private sector companies.
If you do not currently care about the issue of big tech, you should. It is extremely important to the promotion of our First Amendment Rights. Whether you are left, center or right leaning in your political views, this is an extremely important issue that can affect our democracy and our protected freedoms.
Immigration
While immigration was the all-important topic of discussion in the 2016 election, it seems like it will be an issue that will continue to be present during the next 4 years. The topic of immigration has seen less screen or talk time in the last few years, but it is still an important economic and social issue. The President’s previous campaign was heavily based on immigration, while his challenger, Vice President Biden continues to be critical of his policy.
While his dealing with the pandemic, overall, has been more relaxed, the President has taken a stern stance on immigration throughout the events due to Covid-19. President Trump dramatically curtailed immigration and travel into the United States during the coronavirus pandemic, arguing the steps were needed for health reasons and to protect jobs for U.S. workers. The former Vice President, in contrast, has been very critical of Trump’s Covid-19 immigration policy. Vice President Biden is against the cutting of new immigrant numbers and those seeking green cards and asylum. In fact, the former Vice President has said that he would put a pause on deportations for the first 100 days of his presidency.
The President has been adamant throughout his presidency that he would like to end the DACA program. President Trump has seen very little support from the Supreme Court on this issue and lost a court battle on the issue in 2017. Vice President Biden, however, opposes Trump’s actions and calls it “a cruel decision to terminate the DACA program”. Biden has also stated that he would make Dreamers eligible for federal student aid for college and would back legislation that provides for an amnesty path to citizenship for all of the estimated 11 million immigrants living in the country illegally, including those who did not arrive as children.
Student Loans
In the past few years, the ever-increasing debt levels and cost of student loans have become a major talking point. The amount of student debt in the country has exceeded $1.6 trillion and effects tens of millions of Americans. Although every American knows that the debt is an issue, however, President Trump and Joe Biden disagree on how much of the $1.6 trillion in federal student debt owed by 43 million Americans should be forgiven, and equally, how to finance college going forward through a public option.
The Republican Trump administration has sought to limit opportunities for Americans to have their debt forgiven. Education Secretary Betsy DeVos has said that the government must address borrowers’ needs while guarding against taxpayer waste. But the administration has improved access to data showing how much students can expect to pay in tuition and how much they are likely to earn after graduation, treating higher education as a marketplace driven by consumer choice. Students and their families would continue to pay the growing cost of a college education, though low-income students have been given more flexibility on the use of so-called Pell Grants. Vice President Biden, the Democratic challenger, proposes having the government forgive hundreds of billions of dollars in student debt owed by poor and middle-income households. He says that would help to reduce income and wealth inequality. Vice President Biden also says that students from low and moderate-income households should not have to pay for a public college education.
Health Care
When it comes to health care, there is one – and only one – major fight taking place. It is over the Affordable Care Act, a plan introduced by former President Obama. Judging from the number of political ads that have the ACA, pre-existing conditions, single-payor options, etc. as the primary talking point, it is clear that this is an issue that moves the needle from a voter’s perspective.
President Trump has been openly critical of the ACA and has made it his mission to end it. He has given some limited information on his own plan, and has succeeded in lowering drug prices, yet he has not yet released a comprehensive, replacement plan. Biden, on the other hand, has made it one of his main priorities to protect the ACA plan which was created under his term of vice president.
So what does all of this mean for the future of our economy?
For those of us who have watched the hit Broadway Musical Alexander Hamilton, the creators not only wanted to entertain the audience, but also to educate the masses. Remember the scene when both Jefferson and Hamilton tried to convince President Washington that their political views represented the greater public opinion? What began as a personal dispute over a centralized and decentralized government and federal banking system, evolved into the formation of primitive political parties. Both Jefferson’s and Hamilton’s political views represented public opinion. What began as a personal dispute between the two men evolved into the formation of primitive political parties. Jeffersonians shared the belief in a strict interpretation of the Constitution, while Hamiltonians accepted a broad interpretation. And thus, the two-party political system was created.
It is this two-party system which has lived through two hundred years, which has survived wars, has survived famine, depression, and pandemics, has survived civil unrest and political strife, and it will prevail for the next two hundred years.
The framers of our constitution and the early creators of our republic wanted to make sure that no one single party, one president, one legislative or judicial branch, could dramatically alter our economy, social fabric and overall direction of America. In short, they built in enough “political frustration” to ensure that we could stay moving in one general direction, and not subject the far right or far left and their political agenda.
So, the differences, similarities, number of tweets, attack ads, debate interruptions, and political rhetoric of both President Trump and former Vice President Biden, should not dramatically affect the near term for the US economy, as this “political frustration” will take months, if not years, for the policy pendulum to swing in one direction or another. Therefore, the 2020 election will be largely symbolic and more of an election that will call for Democratic reform, or a continuation of Republican policies, as nothing will change quickly in Washington.
Now it is up to you
The ability to vote is something that many Americans take for granted. As an American citizen, you must be engaged, have your voice be heard and make an impact on the direction of American policy. Your vote does matter as it is your statement as to the direction you choose to see for America. It is integral to the American democratic system and it is your civic duty. So, with an election that has already witnessed a historical turn out, you should become educated and go vote. It does not matter to the American fabric if you vote for Joe Biden or Donald Trump, or any other candidate as the freedom and liberties of America WILL continue, regardless of the outcome of this election. But you must let your voice be heard and help set the policy of America.
Talking You off the Cliff
If you have watched any news channel, seen any talk show, or just looked at Twitter or Instagram, you probably heard something along the lines of this being the most important election in American history. From the left you here that Trump will bring the death of hundreds of thousands of more people and from the right you here that if Biden is elected the country will be destroyed and we will be brought to civil war.
I am here to tell you that none of that will happen. Every presidential election is important but for the American people this one is no more important that the last. People fear the worst in most circumstances. It is natural for humans to reach to “The world is going to end!” rather than not much will change.
As stated before, unless a unified government is established not much every happens. There is a reason why presidents do not do everything they say they will do during their term, bureaucracy. While most often the slowness and lack of effectiveness that is the government is seen as a bad thing but in reality, it is a way to keep quick radical changes from occurring.
Some of these policies will get enacted but even if so, it will not be the first day. Heck probably not in the first two years.
In closing, if you are on the edge of the cliff, step back. Everything is going to be fine. The government, whether you love it or hate it, cannot affect your life that much. The economy will stay relatively stable no matter what and you and your loved ones will be alive.
Written by Jett Scarborough
Research Analyst
