Investors and large corporations fear Biden’s election in advance: is their fear justified?

Biden’s program is also controversial among analysts, but several point out that with many elements, perhaps surprisingly left-wing at first, Bident is far from being a “socialist” adjective. In recent days, The Economist has published an analysis of Biden’s economic policy ideas, which we briefly summarize.

The document begins by saying that several American business leaders fear they will face difficulties in electing Biden. However, The Economist believes that the ideas of the Democratic candidate cannot be seen so unilaterally and draws attention to the fact that

Biden rejected the utopian demands of the radical left and his fiscal plans are well founded.

The president’s proposals would only slightly increase the size of the state by trying to respond to real problems such as poor infrastructure, climate change, and the downsides of small businesses. According to The Economist, Biden’s commitments are not ambitious enough in many respects.

The newspaper did not mention it, but it is worth mentioning among the problems the wide social inequality that has continued to grow as a result of Trump’s tax cuts. Biden also tries to answer this, for example by making the tax system more progressive, and also places the middle class at the center of his communication.

According to the newspaper, after Trump came to power in 2017, tax cuts fueled economic growth and stock market rises, all of which were extremely successful until the start of the coronavirus crisis (which, of course, required loose monetary policy from the Fed). Small business confidence indices stood at a 30-year high, with the income of the poorest quartile growing at an average rate of 4.7% per year, and equity markets also rose significantly. For voters, economic performance is paramount in the elections, and if the coronavirus crisis had not arrived, that fact alone would have significantly increased Trump’s chances of reelection.

However, because of the epidemic, Trump’s shortcomings also emerged.

There is no improvement on enduring problems like outdated infrastructure and an empty social network. Investments have stalled, small businesses have found themselves in a difficult situation, Trump’s chaotic style (like his attack on the rule of law or public humiliation of some companies) has “taxed growth”. The confrontation with China had no tangible results as it pushed world trade into uncertainty.

According to The Economist, Biden could already solve these last problems by having good organizational skills, relying on the existing institutional system, listening to advice and considering the consequences. The qualities of the future Democratic president will also be necessary, according to the newspaper, because in 2021, due to the prolonged effects of the crisis, unemployment will continue to rise and corporate bankruptcies will also occur in large numbers. Democrats could respond with a stimulus package of $ 2-3 trillion.

Biden would also maintain better relations with the Allies, thus alleviating the risk of a trade war with China, and the cooperative international attitude of the United States would play an important role in obtaining the vaccine.

If a Democrat is elected, he wants to respond to decades of problems, such as outdated infrastructure that he would develop with environmental considerations in mind. An average American bridge is 43 years old, the newspaper recalls. Research and development spending has now fallen from 1.5% of GDP in the 1960s to 0.7%, and America’s technological advantage has diminished over China. Additionally, we can hope to lift Trump’s restrictions on immigration, which has been a barrier to America’s competitiveness.

These are not the measurements of a socialist

According to the newspaper, all these measures cannot be called socialist because Biden has distanced himself from the ideas of left-wing radicals such as free health care for all, a ban on nuclear energy and the guarantee of employment.

At this point, it is worth mentioning that the fact that a candidate in the United States is already branded a socialist is often an instrument so prevalent in the toolbox of European economic policy that even right-wing rightists do not question it. . In Europe, for example, free public healthcare is widespread, with a relatively small monthly contribution, and we have already seen more examples of downsizing of nuclear power plants, especially in Germany. It is clear from this that the public opinion approach to American economic policy is still far to the right of European thought.

Biden’s actions are not so significant in terms of amount as to impose a heavy burden on the state. If we want to compare it with the proposal of the radical left, the amount of the Biden plan is only 16 to 23% of the cost of the Elizabeth Warren and Bernie Sanders program., and even a right-wing Republican majority can go through the Senate.

If all of Biden’s tax proposals are implemented, which the analysis says is unlikely, corporate profits would fall by as much as 12% and profits above 1% by 14% from current levels.

The most significant danger of the “bidenomia” is that it will not be bold enough because of its pragmatism. The reallocations of resources in the program will hardly be enough to significantly raise the general standard of living of the middle class, which Biden has undertaken. Also, unfortunately some details of the program are missing, we do not know, for example, what Biden is planning with the technology monopolies that are untouchable for the moment in the Trump era, but that pose significant barriers to entry into the technology market.

Economist analysts no longer agree with the patriotic part of Biden’s program: they say that building green infrastructure on a large scale is a very important step, but it is distorted by the fact that the candidate envisions construction with mainly domestic suppliers. . But analysts also lack courage in the field of green politics, highlighting, for example, the carbon tax, which the candidate does not seem brave enough to introduce, according to his announced program.

There are also contradictions in Biden’s plans: in his previous career, he said he was on the side of free trade and still aims to restore the existing relationship system, but this is hampered by a patriotic approach that would exclude American companies from the acquisitions and would not eliminate even criminal duties.

It is also important to talk about the president’s plan to reduce public debt. This will place a significant burden on the economy in the future, according to The Economist, as the current trend is that by 2050, public debt as a percentage of GDP could be 200%. This will really matter if interest rates go above zero.

In general, the newspaper believes that fears about Biden’s idea are unfounded, as the candidate has pinned a series of program points on his banner that would solve old problems in the American economy.

Biden’s vocal revelations about the “regulation” of markets and wealth are generating concern among investors and business leaders, but the fear may become overblown over time. At the moment, aside from tax increases, the program has little specificity and we can hope that the mood of a militant campaign will not necessarily put its stamp on practical governance. At the moment, Biden’s goal is to gain the support of leftists within the party and American workers, and he appears to be using left-wing populist messages to do so as well. And once he comes to power, he will probably try to balance the party’s moderate center majority and the ideas of the left, which is important for support.

Tighter rules would hit the financial markets

A recent Reuters analysis also addresses the Democratic presidential candidate’s impact on financial markets. According to the newspaper, Biden is unlikely to disrupt the financial sphere, but he will likely be less market-friendly than Barack Obama, not to mention Trump. With the election looming and Trump’s illness, Biden’s idea has received a lot of attention in recent days and so Reuters has compiled what we can expect from the president.

• The pandemic drew attention to inequalities in the country, which brought back the Community Reinvestment Act of 1977, which sets rules for fair lending to low-income people. Biden promised to expand the scope of this law.
• Biden’s priorities include the issue of housing. The election of a Democratic presidential candidate is likely to nullify Trump’s efforts to outsource the housing finance giants (Fannie Mae and Freddie Mac) from state control because he believes it would increase the cost of mortgages for the people of low income. Biden would also eliminate lending practices with a racial and ethnic focus.
• In addition to eliminating discriminatory practices, Biden would support stricter supervision of retail loans. There was an attempt to do this after 2009, but with Trump’s coming to power, the rules were relaxed a bit.
• Biden also accepted Warren’s bankruptcy protection proposal, which would make it easier for Americans to initiate private bankruptcy proceedings and provide them with a greater opportunity to protect their assets. This, in turn, would require regulation that, according to Reuters, could only be achieved with a majority in the Democratic Senate. Interestingly, as a senator, Biden still opposed this proposal.

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