The best choice for the US economy
Otto Brøns-Petersen // 1 December 2020
The American presidential election was really about choosing the lesser of two evils. The combination of Biden as president and a Republican majority in the Senate may very well end up being the best possible political outcome – not just for the US but also the rest of us.
Trump’s economic policies have had mixed results. On the plus side there has been tax reform and efforts at deregulation. On the negative side there has been a primarily protectionist trade policy, which could have been worse if the bite had been as bad as the bark. There has also been a lack of effort to counter the growth in government expenditure and the explosive growth in government debt. Without the Coronavirus crisis, there is no doubt that the economy would have ensured Trump’s re-election. However, his personality, leadership style and carelessness with the truth led many voters to reject him.
For many, the choice of voting for Biden was seen as the lesser of two evils rather than a positive one. The same could have been said for Trump. Biden’s economic program is not promising and could prove risky to economic prospects. He campaigned for higher taxes, including a significant increase in corporate taxes. And the risk of the left wing Democrats making their mark may have scared many voters. At the same time, Biden does not differ significantly from Trump when it comes to trade policy and a lack of focus on public finances.
Fortunately, voters have not given Biden a mandate for policies that damage the US economy – at least not on points where he differs significantly from Trump. He will probably have to ensure the support of a Republican Senate majority (which depends on a runoff election in Georgia). If things progress as is customarily the case, he will lose further ground in midterm elections in two years’ time.
Cooperation between the President and Congress might very well be gridlocked. But experience shows that such periods have been positive for the US economy. This was the case under Clinton and partly also under Obama (who compensated for his lack of influence in Congress by increasing (over)regulation). It is during these periods that expenditure growth – and the problems underlying poor public finances – usually slows significantly. Unlike Clinton and Obama, Biden will not have a window of two years with a majority to bring his plans to fruition.
One should always be wary of confusing voters with one person who “has spoken”. Otherwise you may almost be tempted to say that they have been wiser than their politicians. But whatever their motives, voters may very well have made the best possible choice under the circumstances.
The original article was published by CEPOS in Danish.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).