What Will a Biden-Led Economy Look Like?
We’ve all had our fair share of anxiety regarding this recent presidential election. And now, it is finally over. The U.S. economy is in for a lot of changes. Of the adjustments the economy will undergo, the ones that stand out include an emphasis on battling systemic racism, protecting the climate, repairing international relationships, raising the minimum wage, and raising taxes for high earners.
Achieving Economic Equality for All
Right out of the gate, the biggest surprise for me was Biden appointing experts on systemic racism and people of great diversity to fill out Treasury, Federal Reserve, and Economic Council posts. In fact, “Women comprise more than 50% of the new administration’s landing teams, according to the transition team, and more than 40% of advisers are from groups that are historically underrepresented in the federal government, like racial minorities, people with disabilities and those who identify as LGBTQ.” (Nguyen, Epstein 2020). Of the people that Biden appointed, Mehrsa Baradaran is among the most notable as she has authored books on the racial wealth gap such as “The Color of Money: Black Banks and the Racial Wealth Gap” and “How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy”. Besides investing in racial equity and promoting diverse hiring, one of the biggest things Biden is going to crack down on is forgiving student debt, which happens to be one of the greatest systemic barriers for African-Americans trying to achieve job stability. In fact, “A 2018 Study found that black students held as much as 85.8% more debt than white students” (Pallardy 2019).
Beyond maintaining a fair economic system for people of all races, Baradaran “has argued the Fed should play a more aggressive role in establishing bank accounts for every family as way to ensure access to the financial system.” (Shalal, Price 2020). Millions of Americans every year either do not have access to, or choose to not have any or all of the benefits and privileges of having a bank account; these people are known as unbanked (no access to any features of a bank account) or underbanked (limited access to some features of a bank account). Despite the recent decreases in the unbanked and underbanked, there are still an estimated thirty million American households not having access to all the benefits of a bank account. This does not account for individuals who have decided to not answer this survey, and are just as likely to be unbanked or underbanked. Not only will America see more diversity in the workforce, given the recent emphasis on abolishing systemic racism within the government & cabinet, but better equality and access to the banking system.
Creating a Greener Economy
Obviously, one of the major talking points from the Presidential Debates was Biden’s plan to push forward with more renewable energy. A change that raised some questions was Biden’s plan to undo Trump’s Fracking Executive Order, which “could lead to the loss of 19 million jobs, according to U.S. Secretary of Energy Dan Brouillette.” (Park 2020).
The most surprising part of this was that Biden either ended up winning or came quite close to winning states like Pennsylvania and Texas, where fracking is a huge part of the economy. Furthermore, Biden should be proud of the fact that many investors and corporations in the United States have started to align themselves with a cleaner future. Not only have big corporations like Apple been starting to put an emphasis on the environment by recycling products and reducing packaging materials, but “Inflows to ESG ETFs have surged to $22 billion so far in 2020, already about three times the 2019 total, according to data compiled by Bloomberg.” (Wagner, Ballentine 2020). Moreover, this graph further goes to show how far the economy has come in working to help the environment.
And if that was not enough, Biden pulled out the big guns by immediately stating that “he would immediately re-join the Paris climate agreement if elected.” (BBC 2020). Not only does this point toward a greener future, but it also solidifies America’s stance as a major international policy-maker.
Reviving America’s Role in Foreign Affairs
The last four years have seen a lot of harsh breakups between America and the rest of the world, from threatening to back out of NATO to placing many unilateral tariffs on China. The next four years will see a lot more get-togethers between America and the rest of the world as Biden has promised to get rid of Trump’s “America First” attitude. Of the alliances Biden plans to restrengthen, NATO and the World Health Organization stand out.
It also shouldn’t go without mentioning that Biden is NOT going to be quick to call off unilateral tariffs on China, so businesses that work with China shouldn’t hold their breath on any signs that the Chinese trade war is going to vanish. Nonetheless, Biden will definitely be less harsh on China when it comes to trade and placing tariffs on Chinese goods. However, China has very recently just signed into a trade agreement with fourteen other Asia-Pacific nations that will provide a huge hedge against this trade war, which puts the ball in America’s court. As a result, American businesses and consumers are the ones who have the most at stake, along with Biden.
Protecting the Middle and Lower Class
The lower and middle class will generally earn higher wages and the high earners will get taxed more once a Democratic president is inaugurated. “Biden wants to raise taxes for high earners to pay for investment in public services, but says the increase will only impact those earning over $400,000 a year. He supports raising the federal minimum wage to $15 an hour from the current rate of $7.25.” (BBC 2020). This directly opposes the Trickle-Down Theory that Ronald Reagan instituted during the stagflation crisis of the 1970s and 80s. This theory states that when companies and high-earning individuals get taxed less, the extra money they have to spend will usually be reinvested into the stock market, higher wages, and higher consumer spending.
This theory has its setbacks though, as the national debt would inevitably skyrocket, and it can lead to serious inflation. These are definitely things you would not want to see in a pandemic. However, the most important thing during a recession is to give both businesses and people more money to spend, contrary to Biden’s notion of giving them less money to spend due to the tax hike. And if businesses don’t have money to spend, how are they going to hire people with these increased minimum wages? This might be one big play at stockpiling more money for a larger stimulus, but it should not go without mentioning that “About 80% of [people] reported using it on food, and 77.9% on rent, mortgage and/or utilities, including gas, electricity, cable, internet and cellphone.” (Perez-Lopez, Bee 2020). These household expenses do not contribute as much to local businesses, which again really hurts hiring conditions and obviously, businesses.
Recap
In this kind of economic climate, Biden got everything right beside his plans to drastically increase taxes for businesses while increasing the minimum wage. This puts a low ceiling on how flexible businesses can be with their money. As much as I love the effort to satisfy people looking for high-paying, minimum education jobs, it won’t help much as there won’t be many job openings available given the very little money businesses are being given. However, many of these economic impacts can be nullified if the senate voting results hold, and remains Republican. I also expect to see a lot of help from the Federal Reserve for small businesses, with more stimulus checks coming and lowering the minimum requirement for small business loans, as they have “recently done this October.” (Isidore 2020). At the end of the day, expect to see a lot of progress creating a more inclusive, greener economy with an emphasis on helping out the lower class and rebuilding foreign alliances.
