The 2020 Presidential Election: 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 details 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.
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 wise to believe that a Democratic sweep is also 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, and the odds of it coming at some point in the next couple of 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 fiscal dynamics of the country. Nevertheless, the following is a snapshot at some of the key issues in this election and where the candidates line up.
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 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. Mr. 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 a slow opening would be highly likely.
Since the COVID-19 outbreak, President 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. Former Vice President Biden has proposed trillions in spending to create new jobs in clean energy, manufacturing, caregiving, and in programs to ease racial economic inequality. Mr. Biden wants to offer states more support in paying for unemployment benefits and says that households, as well as local governments, need 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. Trump’s tax platform for this election has been one based on the cutting of taxes, such as payroll. The Trump campaign has said that cutting payroll taxes puts 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 a 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 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., and 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 Mr. Biden’s green investment plan. There was confusion over whether he was in support of the “Green New Deal,” which has support from many in the Democrat side of the isle. While a majority of Biden’s plan, which is said to cost $2 trillion over the next 4 years, looks very similar to the Green New Deal, universal jobs and free healthcare are absent from the former Vice President’s plan. Nevertheless, the investment and incentives associated with green technology are a centerpiece for Mr. Biden.
Big tech will most 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, Google and YouTube. It has become clear to many that there is something 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 contained in the Telecommunications Decency Act, these platforms have turned against the American people.
In a second term, Mr. 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. Mr. Biden, the Democratic nominee, has also been critical of Big Tech’s market power. He and running mate Sen. 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, instead of 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.
While immigration was the ever-present 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 and policies were heavily based on immigration, while his challenger, Mr. Biden continues to be critical of these policies.
While his dealing with the pandemic, overall, have been more relaxed, the President has taken a stern stance on immigration throughout the events due to Covid-19. Mr. 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. Mr. 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. Mr. Trump has seen very little support from the Supreme Court on this issue and lost a fight on the issue in 2017. Mr. Biden, however, opposes Trump’s actions and calls it “a cruel decision to terminate the DACA program.” Mr. Biden has 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.
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. Mr. 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. Mr. Biden also says that students from low and moderate-income households should not have to pay for a public college education.
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. 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 be entirely subject to the far right or far left, and their political agendas.
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 effect 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 Democrat 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 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.
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 have heard something along the lines of “this being the most important election in the history of the free world!” From the left, you here that Trump will bring COVID death to hundreds of thousands more people. From the right, you here that Biden will bring us to civil war and unrest and take away your rights under the 2nd Amendment.
But rest assured, none of that will happen. Every presidential election is important, but for the American people, this election is no more important that the last. People fear the worst in most circumstances. It is natural for humans to “pile on” and reach conclusions that “the world is going to end,” rather than not much will change.
As stated before, unless a unified government is established with all branches of government under one political party, not much ever happens. There is a reason why presidents do not accomplish everything on their agenda in their presidential term. It is called checks and balances … and bureaucracy. While most often the speed of government and lack of effectiveness is seen as a bad thing, this process was created to keep quick, unilateral and radical changes from occurring.
Sure, some of the policies outlined in this article will get enacted during the next presidential term. But even if they do, it will not occur on the first day. In fact, it will probably not occur within the first two years.
Therefore, if you are on the edge of the cliff due to the attack adds, the negativity and the spin … take a step back. Everything is going to be fine. The effects of this election, whether you approve or disapprove, will not materially change your life. The economy will stay relatively stable … you and your loved ones will stay alive … and the world will continue to spin in the same manner it has for thousands of years. Again, everything is going to be fine and our democracy will prevail!