Commentary: Choice for US voters concerned about economic prospects could not be clearer

Commentary: Choice for US voters concerned about economic prospects could not be clearer

Joe Biden is better than Donald Trump for the economy – history, market sentiments and Biden’s clear economic agenda shows so, says Nouriel Roubini.

Democratic Presidential candidate Joe Biden and US President Donald Trump
Democratic Presidential candidate and former US Vice President Joe Biden and US President Donald Trump speaking during the first presidential debate at the Case Western Reserve University and Cleveland Clinic in Cleveland, Ohio on Sep 29, 2020. (Photo: AFP/Jim Watson and Saul Loeb)

NEW YORK CITY: 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 per cent of the world’s population now accounts for more than 20 per cent of total COVID-19 deaths – an utterly shameful outcome, given America’s advanced, albeit expensive, healthcare system.

READ: Trump and Biden go on the attack in fiery, chaotic first presidential debate

READ: Trump deflects debate question about whether he condemns white supremacists

DEMOCRATS PRESIDE OVER FASTER GROWTH

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, 1980-1982, 1990, 2001, 2008-2009, and, now, 2020 all occurred when a Republican was in the White House (with the exception of the double-dip recession of 1980-1982, which started under Jimmy Carter but continued under Ronald Reagan).

The escalating trade war is adding to growing fears of a possible recession in the US, with the
The escalating trade war is adding to growing fears of a possible recession in the US, with the tariffs weighing on both economies and global trade. (Photo: AFP/GREG BAKER)

Likewise, the global financial crisis of 2008-2009 was triggered by the 2007-2008 financial crisis, which also occurred on the GOP’s watch.

WHY REPUBLICAN POLICIES LEAD TO RECESSIONS

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.

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 per cent, growth was in free fall, the budget deficit had already exceeded US$1.2 trillion, and the stock market was down almost 60 per cent.

Yet, by the end of Obama’s second term in early 2017, all of those indicators had massively improved.

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.

READ: Commentary: Clash of the titans as Trump, Biden ready for first presidential debate

READ: Commentary: America’s fragile economy 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.

MARKETS SEEM TO FAVOUR A BIDEN PRESIDENT

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 per cent of households, which Trump and congressional Republicans cut merely to give wealthy donors and corporations a US$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.

BIDEN HAS A PLAN FOR JOBS, GROWTH AND MARKETS

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.

LISTEN: Making money greener in the fight against climate change

FILE PHOTO: Democratic U.S. presidential candidate Biden speaks at campaign event in Wilmington, De
Democratic U.S. presidential candidate and former Vice President Joe Biden speaks about his plans for tackling climate change during a campaign event in Wilmington, Delaware on, Jul 14, 2020. (Photo: REUTERS/Leah Millis)

READ: Commentary: Donald Trump doesn't deserve all blame for poor US response to COVID-19

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 terrorised 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.

FOCUS ON TRAINING WORKERS

Trump’s 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.

READ: Commentary: US Supreme Court drama makes for a nastier presidential election

READ: Commentary: Trump will get beaten by Biden by millions of votes but plans to win anyway

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 labour 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.

Nouriel Roubini, Professor of Economics at New York University’s Stern School of Business, is host of NourielToday.com.

Source: Project Syndicate/sl