Updated: Nov 30, 2020
Though the elections held for the most important man in the world always make big news, the recent 2020 elections in the United States will forever be remembered as the ‘pandemic elections'. The United States is currently in the hold of an uncontrollable health crisis that has taken a toll over it both directly (more than 200,000 people have lost their lives due to COVID 19) as well as indirectly (economic setback that the crisis brought along; a national debt of more than 100% of the GDP). All these add to the already existing tensions of heated trade wars, wealth inequality, nationwide protests, unstable financial market and several other rock size issues that are getting lesser time in 2020 but are not getting less important. So these elections, at least in theory, give a platform to the Americans to decide how they want these issues, in a need of a desperate solution, to be dealt with.
As we talk about the economic policies in the United States, we refer to the Fiscal Policies (use of government’s revenue collection and expenditure to affect the country's economy). What we also have to keep in mind here is that paving a fiscal policy is not what majorly comes under the power of the President in the United States and is actually a little more complicated than that. The President prepares a Wishlist of economic policies and hands it over to the Secretary of Treasury [Steven Mnuchin in the Trump government of 2017]. That Wishlist will then be studied by the ‘Office of Management and Budget’, and get converted into a formal bill that can be finally presented before the Congress and can be scrutinised by the Supreme Court to check the constitutionality of the Budgetary Bill. The bill is then passed to the Congressional Budget Office, which serves the House of Representatives and the Senate, where projections are made about where the budget, if passed, would stand in the next ten years.
After this, the bill is finally passed to both- the House and the Senate Budget Committees where it is further studied, negotiated and amended. But this process is not free from party politics. Whenever the President’s political party is in majority in the Congress, the bills pass through them comparatively quicker with no amendments sometimes. Whenever there is a difference in the suggestions of both the houses, a Conference Committee is called to work on a Conference Report, which is the final version of a ready-to-be-passed bill that is negotiated between the House of Representatives and the Senate.
And even after all this hassle, the final Budget stands more like a guideline than a firm rule. So while voting, as we’ve learnt, the President ultimately has only a limited say, because of lacking direct authority in passing a budgetary law, and thus what they promise can differ from what they do in reality.
Now that we’ve understood the role of the President in handling the economy of the States, let’s pay attention to three major Economic agendas backed by the two candidates running for the Presidential race of 2020.
The Republican economic policies largely push for more aid for businesses, and believe that shoring them up will help people as this will broadly strengthen the economy.
On the other hand, Congressional Democrats believe that a push for more individual aid such as increased unemployment would ensure affordability of day-to-day necessities to families and a strong consumer spending in the economy.
We see the U.S.-China trade war dominating headlines since President Trump took office. In his first two years as president, the Trump Administration has pulled out of several trade deals, brought a new trade deal with Canada and Mexico, and levied hundreds of billions of dollars in tariffs on Chinese companies. Trump has threatened to remove Chinese companies from U.S. stock exchanges and demanded Chinese firm Bytedance to sell its U.S. operations. So we can expect Trump to continue with these policies if he gets reelected.
Biden's proposed trade plan focuses on improving the competitiveness of U.S. industry by investments in infrastructure and R&D across the economy, confrontation with China and cooperation with allies rather than unilateral acts on trade.
Trump is a big-time supporter of the free market. He believes that a reduction of taxes on individuals and businesses would strengthen the economy. The reduced revenue due to cut in taxes will be compensated with reduced government spendings. This approach could be clearly seen in his last tenure. In 2018, the corporate taxes were cut from 35% to 21% and taxes on working Americans (particularly the rich class) were decreased by 65%. This policy, according to economists, have majorly helped the wealthy class who pay higher taxes, and thus accelerated income gaps and inequality in the country.
The plan is believed to take the extra money saved from taxes into use by big businessmen and industrialists in a far more efficient way than the government spendings would. But economists opine that this method won’t give an impact as great as the law picturises.
Biden, on the contrary, promotes an increase in taxes that will bring an increase in the government revenue. This revenue would be spent on manufacturing, renewable energy and caregiving. The focus is planned to be inclined towards infrastructural development which will ultimately benefit the lower income households who’ll go out and spend money, unlike the richer households who are more likely to spend it on inner assets.
But scholars believe that 2021 is not the right time to have tax hikes, which in itself is a confectionary fiscal policy to control high demand or inflation in a prospering economy and not during the current situation of uncertainty.