Tags: biden | trump | u.s. economy | 2024

'Bidenomics,' 'Trumponomics' 2.0 Would Both Hurt US

'Bidenomics,' 'Trumponomics' 2.0 Would Both Hurt US
President Joe Biden, left, and former president and Republican presidential candidate Donald Trump (AP)

Peter Morici By Thursday, 16 May 2024 11:28 AM EDT Current | Bio | Archive

U.S. President Joe Biden and former President Donald Trump both have big plans to reshape the post-COVID U.S. economy.

Sweeping 2024 U.S. presidential campaign ideas — like those embodied in Biden’s Build Back America and in Trump’s pledges to overhaul the U.S. civil service and the Federal Reserve, commence mass deportations, and require national teacher certification and college entrance and exit examinations — would face tough challenges in U.S. courts and to win a Senate majority.

That said, if Trump wins the election this November, elements of the 2017 Tax Act that expire in 2025 — notably, lower marginal tax rates and the higher estate tax exemptions — would be extended and perhaps expanded.

If Biden is re-elected, then, emboldened with a new mandate, he could win increased benefits to families, for example assistance for child-care costs.

Biden would take a page from former President Barack Obama when dealing with Bush-era tax cuts. Biden would let the tax rates on high-earning Americans rise back to pre-2017 levels, and raise corporate taxes too, but continue the lower tax rates on middle-class individuals and families.

Still, the next president will remain constrained by an already large federal deficit and rising borrowing costs. Even if there were no new initiatives, the U.S. Congressional Budget Office estimates the federal deficit will increase to 6.1% of GDP in 2034 from 5.6% currently. Those figures should be viewed in the context of other demands on the capital markets — for example, private investment to mitigate climate change and build out artificial intelligence.

Whether a Democrat or a Republican is in the Oval Office next year, U.S. borrowing is going to increase. The 10-year Treasury yield will be much higher than the 2.5% rate the U.S. experienced from the wake of the 2008 financial crisis until the COVID-19 pandemic. In fact, over the past 40 years, the 10-year Treasury rate has averaged about 5%; going forward, rates of greater than 4% are likely.

Trade protection leaves US vulnerable

Both Biden and Trump are trade protectionists. They eschew new free-trade agreements, and Trump promises a 10% across the board tariff on U.S. imports, and even higher rates on goods from China. The Biden administration, meanwhile, is already levying higher duties on Chinese-made electric vehicles and related components.

Trump’s policies would be damaging to our allies in Europe and Japan, who are struggling to grow their economies. But both Biden’s and Trump’s trade postures would limit economic growth of these friendly countries. That in turn would limit their resources for defense spending to support the United States, which would further strain the U.S. Pentagon’s budget.

Moreover, fast-growing Southeast Asia is already dependent on China for trade markets. Higher American tariffs would push them further into Beijing’s arms.

With economies of scale so important in high-tech products, EVs and the like, none of this will be good for long-term U.S. growth.

Tariff trouble

Trump would be worse than Biden on trade relationships with U.S. allies, and more aggressive about decoupling the U.S. economy from China.

Biden’s industrial policies are terribly expensive and not applicable across all industries owing to those high costs. Whereas Trump’s message to all American businesses would be that it may be smart to invest in China to sell there, but not for manufacturing components or goods to sell to American consumers.

On regulation, Trump would try to roll back Biden’s aggressive agenda. That’s a tough task, but it could speed new projects — including some of Biden’s industrial policies.

With either Biden or Trump in charge, the U.S. economy is in for more fiscal stimulus in 2025 and short-term growth, but the Federal Reserve will be even more challenged to keep a lid on inflation.

The goals of U.S. growth and prosperity would be better served by smaller federal deficits, lower nominal interest rates, and less regulation. The U.S. should also encourage more open commerce with our allies globally and particularly in Southeast Asia to widen markets for American technology products, electric vehicles and the like.

But this would require Americans to elect a president with a bold vision to harness government spending and confront entitlements — for example, to raise the Social Security retirement age, which neither Trump nor Biden are inclined to do. This innovative leader would understand that America’s high-tech future is dependent on trade with our friends and not threatened by them.

Americans likely will have to wait until the 2028 U.S. election for a presidential hopeful with more courage and optimism about America’s strengths than the two current front-runners — one nearly 80 years old and one post-80 — have been able to muster.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

© 2024 Newsmax Finance. All rights reserved.

Joe Biden and Donald Trump are each pushing a protectionist agenda that weakens U.S. interests at home and globally.
biden, trump, u.s. economy, 2024
Thursday, 16 May 2024 11:28 AM
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