How will a Joe Biden presidency affect the American Economy?

On November 7th, four long days of waiting after the election, the Associated Press officially called the U.S. Presidential Election in favour of former Vice-President Joe Biden and his running mate Kamala Harris. For many Americans, their election symbolized a rejection of the Trumpism which characterized the White House since 2016; celebrations erupted across the country, from New York to Delaware to Trump’s own National Golf Club in Virginia. 

Donald Trump, and indeed many in the Republican Party, have yet to concede and instead point to “widespread voter fraud.”  The President and his legal team, led by former New York City mayor Rudy Giuliani, have launched legal challenges in the states that Democrats flipped: Pennsylvania, Nevada, Michigan, Arizona and Georgia. It is yet to be seen whether any of these legal challenges come to fruition; however, early indications aren’t promising.

As a result, COVID-19 and the economy have been left largely unchecked by the White House. Biden will inherit an economy laid to bare by the coronavirus pandemic, which has infected 3 million Americans in November alone and exposed deep-seated racial, societal and economic inequalities. Black Americans are 3.2 times more likely to die from COVID-19; at the same time, they are more likely to be unemployed yet half as likely to receive unemployment benefits than White Americans, according to research conducted by the University of Chicago.

Amid the economic upset caused by a resurgence in COVID-19 cases, the Senate has yet to reach bipartisan consensus on the second round of stimulus. The $500 billion bill proposed by Republican Senate Majority Leader Mitch McConnel falls far short of the $2.2 trillion Democrats require to fund an increase unemployment benefits, send out another round of stimulus, and provide relief to small business, education, and childcare. Meanwhile, according to the Brookings Institute, small business revenue is down 20%, and in 26 states, 20% of households are behind on rent.

This economic upset will shape the presidency of Biden and Harris, who ran on a campaign of “Building Back Better.” Their plan includes tackling COVID-19 through “21st century care” and a dedicated task force, investing in American Manufacturing through the creation of millions of union jobs, renewing American infrastructure and investing in renewable transport and renewable energy. Biden also plans to tackle racial and economic inequality by increasing access to affordable housing, investing in Black, Brown and Native owned small businesses and passing police reform legislation, among other initiatives. 

Moody’s analysis predicts that Biden’s policies would grow GDP by 4.2% per year until 2024, and 2.9% thereafter if he is re-elected. Similarly, they estimate the jobless rate to decrease to 5.4% by the end of his first term. The report also suggests higher growth in corporate profits, offsetting Biden’s plan to repeal Trump’s lower corporate tax rates. 

However, Biden’s ability to pass large-scale legislation and stimulus rests almost entirely on the U.S. Senate races in Georgia. Currently, Republicans hold half of the Senate Seats with the last two to be decided by a run-off election in January. Democrats would need both Raphael Warnock and Jon Ossoff to beat their Republican incumbents to tie the Senate. In cases where the Senate is split, Vice-President-Elect Kamala Harris would be able to cast a deciding vote to pass the landmark legislation on which their campaign was run. As a result of the immense implications of the Georgia run-off, both Democrats and Republicans are pouring massive amounts of money, into their respective candidates. 

If Democrats fail to secure a majority, much of Biden’s landmark legislation will likely be halted under Mitch McConnell. As a result, Biden may have to borrow from Trump’s playbook to advance his agenda.  According to the Washington Post, Biden is planning a “flurry of executive orders” to reverse some of Trumps most controversial policies. From his first day in office, Biden will re-join the Paris Climate Accord and reinstate public health and environmental regulations that were in place under The Obama Administration.

To lessen the impact of the COVID-19 on the economy, he is also prepared to “extend moratoriums on evictions and foreclosures” and defer the re-payment of payroll taxes, according to the New York Times. Biden’s more extensive economic policies, however, such as his plan to increase taxes for higher income brackets and enact landmark healthcare reforms aren’t likely to be approved by a Republican-controlled Senate.

The economic implications of a Biden-Harris Administration depend almost entirely on the outcome in Georgia. Nonetheless, with a coronavirus vaccine almost around the corner, Americans should soon be able to spend nearly $2.5 trillion in accumulated savings, which – according to the chief investment strategist for Minneapolis-based Leuthold Group LLC – is “the fuel for a growth bomb waiting to explode.” Indeed, in the short term and without Republican support, Biden’s best chance at reviving the economy is closely linked with his ability to control the coronavirus pandemic – something his predecessor failed to accept. 

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