Why Biden Is Better Than Trump for the Economy
Sep 29, 2020NOURIEL ROUBINI
The presumption that Republicans are better than Democrats at economic
stewardship is a longstanding myth that must be debunked. For all Americans who
care about their and their children’s future, the right choice this November
could not be clearer.
NEW YORK – Joe Biden has consistently
held a wide polling lead over
US President Donald Trump ahead of November’s election. But, despite Trump’s
botched response to the COVID-19 pandemic – a failure that has left the economy
far weaker than it otherwise would have been – he has maintained a marginal edge on
the question of which candidate would be better for the US economy. Thanks to
Trump, a country with just 4% of the world’s population now accounts for more
than 20% of total COVID-19 deaths – an utterly shameful outcome, given
America’s advanced (albeit expensive) health-care system.
1.
The presumption that Republicans are better
than Democrats at economic stewardship is a longstanding myth that must be
debunked. In our 1997 book, Political Cycles and the
Macroeconomy, the late (and great) Alberto Alesina and I showed that
Democratic administrations tend to preside over faster growth, lower
unemployment, and stronger stock markets than Republican presidents do.
In fact, US recessions almost always
occur under Republican administrations – a pattern that has persisted since our
book appeared. The recessions of 1970, 1980-82, 1990, 2001, 2008-09, and, now,
2020 all occurred when a Republican was in the White House (with the exception
of the double-dip recession of 1980-82, which started under Jimmy Carter but
continued under Ronald Reagan). Likewise, the Great Recession of 2008-09 was
triggered by the 2007-08 financial crisis, which also occurred on the GOP’s
watch.1
This tendency is not random: loose
regulatory policies lead to financial crises and recessions. And, compounding
matters, Republicans consistently pursue reckless fiscal policies, spending as
much as Democrats do, but refusing to raise taxes to make up for the resulting
budget shortfalls.1
Owing to such mismanagement under the
George W. Bush presidency, President Barack Obama and Vice President Biden
inherited the worst recession since the Great Depression. In early 2009, the US
unemployment rate surpassed 10%, growth was in free fall, the budget deficit
had already exceeded $1.2 trillion, and the
stock market was down almost 60%.
Yet, by the end of Obama’s second term in early 2017, all of those indicators
had massively improved.1
In fact, even before the COVID-19
recession, US employment and GDP growth, as well as the stock market’s
performance, were better under Obama than
under Trump. Just as Trump inherited millions
from his father, only to squander it on
business failures, so he inherited a strong economy from his predecessor, only
to wreck it within a single term.
The rally in equity prices this past
August coincided with a hardening of Biden’s polling lead, suggesting that
markets are not nervous about a Biden presidency, or about the prospects of a
Democratic sweep of Congress. The reason is simple: a Biden administration
would be unlikely to pursue radical economic policies. Biden may be surrounded
by progressive advisers, but they are all fully within the political
mainstream. Moreover, his vice-presidential pick, US Senator Kamala Harris of
California, is a proven moderate, and most of the Democratic senators who would
be seated in a new Congress are more centrist than the left wing of their
party.
Yes, a Biden administration might raise
marginal tax rates on corporations and the top 1% of households, which Trump
and congressional Republicans cut merely to give wealthy donors and
corporations a $1.5 trillion handout. But a higher tax rate would result in
only a modest hit to corporate profits. And any costs to the economy would be
more than offset by closing the loopholes that allow for tax avoidance and
shifting profits and production abroad, and with Biden’s proposed “Made in America” policies to bring more jobs,
profits, and production home.1
Moreover, while Trump and his fellow
Republicans have not even bothered to formulate a policy
platform for this election, Biden has proposed a suite of fiscal policies
designed to boost economic growth. If Democrats take control of both houses of
Congress and the White House, a Biden administration would pursue a larger
fiscal stimulus targeted at households, workers, and small businesses that need
it, as well as job-creating infrastructure spending and investments in the
green economy. They would not invest in tax cuts for billionaires, but rather
in education and worker retraining, and in proactive industrial and innovation
policies to ensure future competitiveness. Private business would no longer be
terrorized by the president in Twitter tantrums.
Democrats also are calling for higher
minimum wages to boost labor income and consumption, along with more sensible
regulations to reduce carbon dioxide emissions. They would push for policies to
restore some bargaining power to workers, and to protect savers from predatory
financial institutions. And they would have a much more sensible approach to
trade, immigration, and foreign policy, repairing US alliances and partnerships
and pursuing a policy of “coopetition” rather than lose-lose containment vis-à-vis China.
All these measures would be good for jobs, growth, and markets.
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Although Trump ran as a populist, he is
a wannabe plutocrat – a pluto-populist – and that is how he has
governed. His economic policies have been disastrous for US workers and
long-term economic competitiveness. Trade and immigration policies that were
billed as measures to restore US jobs have had the opposite effect. The “deaths of despair” that
disproportionately afflict white blue-collar and precariat workers have not fallen under
Trump; with more than 70,000 drug overdose deaths in 2019, this American
carnage continues. If the US is to fill the high-value jobs of the future, it
will need to train its labor force, not embrace self-destructive protectionism
and xenophobia.
The choice for US voters who are
concerned about America’s economic prospects could not be clearer. Biden, who
has long tapped into blue-collar concerns, is the only presidential candidate
in recent history without an Ivy League background. He has a better chance than
anyone of rebuilding the Democratic coalition and winning back the support of
disaffected, working-class voters. For all Americans who care about their and
their children’s future, the right choice this November could not be clearer.
FEATURED
Oct 1, 2020 MARIANA MAZZUCATO, et
al.
Sep 29, 2020 NOURIEL ROUBINI
Sep 28, 2020 CHRIS PATTEN
4. The Republican Threat to the Republic
Oct 2, 2020 JOSEPH E. STIGLITZ
Writing for PS since 2007
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Nouriel Roubini, Professor of Economics at New York University's Stern
School of Business and Chairman of Roubini
Macro Associates, was Senior Economist for International Affairs in
the White House’s Council of Economic Advisers during the Clinton
Administration. He has worked for the International Monetary Fund, the US
Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of
NourielToday.com.
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