With the Democratic caucus and Republican primaries concluded, it’s officially round two of the Biden v Trump showdown. Economic policy is a major battleground for control, impacting industries, trade, and the average person.
With massive differences in political ideology, economic policy, and areas of focus, the November elections will have completely different outcomes for the US economy, depending on who wins.
Here’s a look at what the two opposing sides have in store for the country, and how it would play out in the economy.
Tax and Jobs
A significant portion of the Tax Cuts and Jobs Act (TCJA) will expire at the end of 2025, which makes this one of the highest priorities for the incoming president when he takes office. Should the provisions expire, high-income earners can expect to see their marginal tax rate increase from the current 37% to 39.6%, while the standard deduction amount will be reduced by about 50%.
The Biden camp would like to see the TCJA repealed and has long opposed tax cuts for the wealthy, which Democrats believe would assist in reducing the budget deficit. They’re looking to restore the marginal tax rate for high-income earners and introduce new taxes on billionaires and earners crossing the $1 million a year threshold.
For Trump’s team, the TCJA is a cornerstone of their economic policy, and they’ve continued to highlight the benefits of this legislation throughout their campaign. Their position comprises lower taxes and a commitment to extending the TCJA’s business and high-earner provisions.
Student Loan Forgiveness
At the center of Biden’s contributions during his term of office is student loan forgiveness. Likely to win over young people across the country, Biden’s campaign is hard at work to make this a central point. According to Antonio Arellano, the vice president of communications at NextGen America, “Young voters right now are the largest eligible voting bloc in modern American history, surpassing baby boomers. And they’re being very clear about where they stand.” The Biden campaign has faced immense criticism from its younger base over military action in the Israel/Palestine conflict. They announced that 150,000 loans will be forgiven to the tune of $1.2 billion, and are looking to make student loan forgiveness a permanent feature, should he secure a second term.
Conversely, Trump has deeply opposed student loan forgiveness, using the Republican Supreme Court majority to block Biden’s efforts. In his view, the legislation is unfair towards individuals who have already settled their debt. During Trump’s tenure in the Oval Office, loan forgiveness was opposed by the Department of Education, for students looking to utilize the borrower defense legislation, which makes provisions for learners to have debt forgiven if they had been misled by their institutions.
Junk Fees: Biden’s Approach
Another area that has secured the attention of the Biden Administration is the issue of “junk fees”. In an effort to curtail monopolies across multiple sectors, President Biden released an executive order to crack down on hidden fees that are imposed on consumers. With a special focus on financial institutions, the Consumer Financial Protection Bureau placed an $8 limit on late fees for credit card payments, which challenges the industry average sitting on $32. The bureau is also considering putting limits on overdraft fees.
During Trump’s presidency, the Consumer Financial Protection Bureau leaned more towards institutional freedoms, removing restrictions on payday lending instituted by Obama and decidedly less oversight from government.
Biden’s Electoral Economic Plan
Overall, Biden’s bid for 2024 contains an economic plan that aims at providing relief for ordinary citizens, proposing tax breaks for families, reduced healthcare costs, and increased taxes on corporations and high-income earners. Biden used parts of his State of the Union address to lay out the economic plans he’d roll out in 2035, should he remain in Office.
He’s looking to trim down the deficits, specifically targeting an amount of $3 trillion over the next ten years, as well as increase tax revenue by $4.9 trillion and allocate $1.9 trillion towards program funding over the same period. The Democrats are confident in their budget projections, despite facing opposition from Republicans who claim the budget is not financially sound. “Congressional Republicans don’t tell you what they cut, who they harm. The president is transparent; details every way he shows he values the American people,” said Shalanda Young, the White House budget director.
Under Biden, parents could benefit from a bump in the child tax credit, around the 2021 ballpark, which was increased with the help of the Covid relief packages. Those interested in purchasing real estate would also benefit from Biden’s plan with a proposed $10,000 tax credit, and a $10 billion fund set aside for assisting first-generation homeowners with deposits. Corporates and ultra-high net worth individuals can expect heavier taxes.
Trump’s Electoral Economic Plan
Trump’s bid for re-election is underpinned by an economic plan that aims to stimulate business in efforts to boost the economy. In an interview with CNBC, Trump outlined some of the issues that are top of mind for him and his campaign team; these included import tariffs, reducing taxes, and evaluating the Federal Reserve Bank.
In a continuation of his efforts in 2017, Trump will be focusing on targeted tariffs and a blanket import tariff of 10% on all goods coming into the country. While a ruling like this will still need congressional input, Trump remains resolute that tariffs have a net positive impact on manufacturing industries and points to his steel tariffs on China. Some economists have a more conservative view on this, with a general stance being that tariffs end up taxing Americans and potentially leading to inflation. Additionally, there are considerations of retaliatory tariffs from other countries and the impact that could have on the overall economy and the state of international trade.
The Tax Cut and Jobs Act is part of Trump’s legacy from his time in the White House, securing $1.7 trillion worth of tax cuts from Congress. Corporations and wealthy individuals are the major beneficiaries of this legislation and would like to see Trump back in office ahead of the expiration of those provisions at the end of 2025. Tax provisions are difficult to repeal once granted, and so the affected groups will be interested in the configuration of both the Senate and the House, especially with Biden keen on reintroducing high tax rates to both groups. Corporates in particular stand to gain from a Republican government, with their taxes currently sitting at 21% from 35%. With the Democrats, this would soar to 28% while Trump is committed to keeping it the same.
Trump had his eyes on the Federal Reserve Bank from the start of his term back in 2017, having been critical of the central bank and its chairman, Jerome Powell. He’s also made it very clear in comments to the media that if he were to return to Office, Jerome would not be reappointed. While the Federal Reserve is a nonpartisan entity, there are fears (and hopes) that Trump could appoint a friendly face should the post become vacant.
Conclusion
Come November, when registered voters take to the polls, Biden and Trump will face off at the ballots once again. While much will be dependent on the House and Senate configurations, each brings with them a set of economic benefits for different parts of the population, which could offer economic relief in various ways.
In the most general terms, a Republican presidency promises lower taxes, particularly for high-income earners and corporations. According to economists at Wells Fargo under Republican rule, we could see “faster economic growth, higher inflation, larger budget deficits, higher Treasury yields, and a steeper curve, all else equal.” Democrats, on the other hand, would allow the tax cuts to expire and increase taxation on those groups.
Experts predict that a mixed government, with each party claiming majority in at least one of the government branches, would yield a tax outcome that would likely curb growth, inflation, government borrowing, and yields, while a democratic government would result in outcomes that sit somewhere between the two possibilities. Ultimately, only time will tell what the future holds for the US economy following the November 2024 elections.
