A Comparative Analysis of the American Economy Under Biden and Trump

Opinion Economic Policy Analysis by Dana El Khoury, Contributor

October 30th, 2020

The 2020 American presidential race is reaching its finish line, with former Vice President Joe Biden slightly leading in the fluctuating, tight race against President Donald Trump (BBC, 2020). And with all the turbulence 2020 has put people through, the democratic and republican candidates of this presidential race have only exacerbated the situation and took away any hope the people had for a better 2021. To this extent, many Americans’ voting decision will be based on the better alternative among the worse, as neither Biden nor Trump has convinced these Americans that they can achieve a better, more promising tomorrow (Cabral, 2020). In order for the bewildered Americans to make a reasonable voting choice, they must be aware of the alternatives. Biden and Trump’s agendas differ on multiple levels; notably, and a level that generates a direct effect on American wellbeing, is the economic plan of the nominees. The economic responsibility the 2020 elected candidate would be entrusted with is one that is unmatched and unprecedented – this individual would have to carry the burden of economic recovery post-COVID-19 global pandemic. The International Monetary Fund (IMF) predicted that the United State’s economy output will plummet 8% in 2020, following 2.3% economic growth in 2019. The IMF’s expectations for an era where the virus is contained and economic-impeding measures are lifted consists of a sharp recovery, with 4.5% expected growth in 2021 (IMF, 2020). Thus, by studying the economic aspirations each candidate has, the Americans could make a sound choice as to which plan has greater potential for achieving the economic recovery America needs. This article will discuss three aspirations: taxes, health care, and jobs & wages.

Taxes

A first area where Trump and Biden disagree is taxes. Trump’s administration planned for the extension of 2017 Tax Cuts and Jobs Act, which was to expire in 2021, and this tax reform implemented by the Trump administration includes a deduction of tax rates on the business sector and individuals, a boost in the standard deductions and the credit returns from family tax, setting limits to interest deduced from mortgages, decreasing individuals’ minimum tax and cancelling it completely for corporations... among others (IRS, 2018) (IRS, 2019). The purpose of this extension, according to the Trump administration, would be to create more jobs and to put an end to American economic dependency on China. The Committee for a Responsible Federal Budget have said that such tax reform would increase federal debt by $1.8 trillion through 2029 (CRFB, 2019). As for Biden, he intends to increase individual income tax from 37%, under Trump’s presidency, back to 39.6% and the corporate income tax from 21% to 28%. The candidate also plans on enforcing social security taxes on revenues exceeding $400,000, and on incomes greater than $1 million annually, he plans on deriving capital gains and dividends. Contrary to Trump, Biden plans on targeting large corporations and impose a 15% minimum tax on their book profits (Watson, Li, LaJoie, 2020).

To understand how Biden’s tax initiative is more suitable for Americans, as was published by the Tax Policy Center, the candidate’s plan will boost national revenue by an estimate of $4 trillion between 2021-2025, and 93% of these tax increases will be paid by the top 20% households by income on average. More than half of the tax hike will be borne by 1% of households in the economy (Gleckman, 2020).

Health Care

On another scale, Trump and Biden remain divergent when discussing health care. On one hand, in his proposal, current president Donald Trump discusses major cuts to health care expenditure, with significant cuts to Medicaid, amounting $900 billion, and Medicare, amounting to $450 billion. Moreover, Trump’s proposal would decrease the budget allocated to the Department of Health and Human Services by 10% from 2020 levels, requesting they receive $94.5 billion. Lastly, Trump has made empty promises with regards to decreasing prices of drugs (Trump, 2020). On the other hand, Biden was swift to discuss his involvement in the Affordable Care Act, alongside former president Barack Obama, and his proposal builds upon expanding this act. This policy was enacted to make health insurance more affordable, to expand Medicaid program, and to support medical care methods with the intentions of lowering costs. Biden’s expansion would include the elimination of caps on tax of 400% income and diminish the minimal coverage expense to 8.5% of income. Biden will not be pursuing Medicare for All, rather a similar initiative to create public health insurance. The democratic candidate will also set the eligibility age at 60 for Medicare instead of 65 (Biden, 2020).

Regarding the initiatives taken by Trump during the COVID-19 pandemic, it speaks for itself which candidate would be better at managing the American’s health. Biden’s campaign will provide for 97% of Americans’ insurance and will cost approximately $750 billion throughout the next decade. This sum will be paid for by the revenue generated from his capital gains proposal, meaning Americans will not have to pay the incremental costs of health care (Biden, 2020).

Jobs & Wages

The COVID-induced shock that hit the American labor market has left the latter in major need of recovery – and that would be a burden on the next president’s shoulders. With around 22 million jobs lost during the economic shutdown caused by the pandemic, both Trump and Biden have planned elaborately their respective recovery strategies. Trump’s initiative is to generate 10 million jobs within 10 months, plus create a million of small business. He intends on cutting taxes to protect American jobs. In Trump’s defense, he did create 6.6 million jobs in his first three years in office (Morath and Chaney, 2020). As for the post-virus plan, Trump’s plan was to pass a $2 trillion infrastructure bill to spur new jobs. He even proposed that the American government purchase 4-5 years’ value of plane tickets to provide financial aid to theindustry (Fabian, 2020). As for Biden, he insists that fiscal expenditure should increase to support laborers during high unemployment eras. This expenditure would be distributed to state and local governments to ensure laborers are not laid off (Morath and Chaney, 2020). Similarly, the democratic candidate is aiming to provide companies with tax credits to create new job opportunities. Biden even touches upon increasing minimum wage to $15 as he believes labor leaders should take part in the negotiations of the new trade deal (Biden, 2020).

The Proof is in the Pudding

While campaigns, plans, and agendas are vital for voters to make sound decisions, and while the promises presidential nominees could seem attractive on paper, sometimes these promises are simply forms of bargaining chips used by candidates to galvanize support and win elections. Therefore, to evaluate how candid and legitimate nominees are, it is important to look upon their economic track records under the public eye. Total employment today is estimated to be lower by 3.9 million than in January 2017, when Trump became president (Jackson, 2020), and only about 9.3 million jobs have been recovered so far, after COVID-19 drove over 22.2 million Americans into unemployment (Bartash, 2020). As well, during his 2016 campaign, Trump vowed for a 4%-6% growth of the American economy annually, but instead has achieved only 2.2% growth in 2019 and 3% in 2018 (Jackson, 2020). In addition, Trump as president, in addition to a global pandemic, shrank the American economy during the second quarter of 2020 at an annual rate of 32.9%, the lowest collapse ever recorded in American history (Horsley, 2020). And while Trump also promised to reduce trade deficit, histime in office only grew it larger. In 2017, Trump’s first year in office, the deficit grew from $504.8 billion to $568.4 (Bureau of Economic Analysis, 2018). In 2018, it reached $891.3 billion (Scott, 2019), before dropping to $616.8 billion in 2019 (Mutikani, 2020), only to increase again in 2020 to records high in 14 years, with a deficit of $67.1 in August only (CNBC, 2020). As for health care, aside from Trump’s failing response to the COVID-19 pandemic, he himself has fallen victim to the virus. As Trump kept ignoring warnings regarding the need to enhance his self-precautionary measures, he eventually tested positive for COVID- 19 just a few weeks before the elections (Santora, 2020). To top off his carelessness, the president chose to cut ties with the World Health Organization (WHO) amid a global pandemic, as he believed the WHO was not condemning China for its inability to contain the spread. This pull-out cost the organization a loss of $450 million annually, which is assumed to not only have negative consequences on the ability to fund research for a COVID vaccine, but also put a halt to other pressing projects the WHO had been working on prior to the pandemic, risking the lives of millions globally (Al Hassanieh, 2020).

However, when one comes to reflect upon the economic initiatives Joe Biden has accomplished, the list speaks for itself on whether Biden is a man of his words or not. He was responsible for overseeing the stimulus package in 2009, and the passing of the Recovery Act which saved the American economy post-recession (Miami-Dade Democratic Party, 2020). When he was Vice President, he was responsible for managing the $800 billion fund and direct the money in the appropriate direction for recovery (Khalid, 2020). The Recovery Act is said to have been the reason behind a 2.4 boost in the American economy in 2010 (Office of the Press Secretary, 2016). In the face of a potential federal shutdown, Biden brokered the negotiations that took place between democratic and republican senators, eventually passing the 2011 Budget Control Act. This act had the intention of decreasing budget deficit by at least $2.1 trillion between 2012 to 2021 – but then Trump happened (Labonte & Levit, 2011). Lastly, in 2014, Biden took charge on an employment and training program, with $1.5 billion in grants and 21 million middle-classed people participating (Miami-Dade Democratic Party, 2020). Aside from playing a pivotal role in the passing of the Affordable Care Act, Biden launched an initiative which helps speed-up the prevention, diagnosis and treatment of cancer, known as ‘Cancer Moonshot’ (Miami-Dade Democratic Party, 2020). Moreover, unlike Donald Trump, Joe Biden at least has a COVID-19 response strategy he intends on implementing if he gets into office, and ironically, the first initiative on his list consists of “Fixing Trump’s testing- and-tracing fiasco” (Biden Administration, 2020).

In brief, to individuals who remain at a crossroad regarding which candidate to vote for, the Biden administration would opt for greater fiscal expenditure targeting households, laborers, and small and upcoming business in need of it. How? This administration will invest in middle-class educative and labor-centric programs, rather than cut taxes off big sharks dominating the financial sector and economy. This administration will provide for a fair and reasonable health care program targeting all Americans, rather than mismanage health matters and have the lives of over 200,000 Americans on their hands. This administration will create jobs for the people, through the proposed infrastructure stimulus initiative, rather than take them away from them. It is no longer a matter of which president would be better for America. It has become one whereby the question asked should be: which president will save America from four years of Trump? Trump himself, or the better, worse option, Biden?

References

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Dana El Khoury – Economics Research Intern

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