Candidates President Donald Trump and former Vice President Joe Biden have each discussed how they will address COVID-19 as well as their long-term plans for a full economic recovery. But the fact is neither candidate has a solid plan to rebuild the economy — so the best we can do is vote for the best of what’s available, which is Biden's plan.
For the past several months, Trump has framed his campaign around an economic recovery with tax and regulation cuts. What does this entail? We don’t entirely know. Taxes can be collected from a variety of places, and where the specific cuts will be applied will be key to the plan's effectiveness.
Biden’s plan for an economic recovery is framed around a different philosophy: using the federal government’s massive spending power to carry out a multi-trillion dollar infrastructure plan, which he claims would spur jobs growth through clean energy production, education investment and more. Like Trump’s plan, Biden also proposes changes to the tax code by raising income taxes for Americans making more than $400,000 per year.
Different philosophies are at play in these two sets of policies. Neither of them maximizes economic growth. Neither candidate seems to be listening to economists, or the facts. Federal Reserve chairperson Jerome Powell has repeatedly emphasized the importance of a second stimulus bill to prevent a worsening of the American economy — yet Trump stated last week that he would further delay stimulus talks for another month until after the election. Why?
Both candidates fail to recognize one thing: tax cuts at the bottom brackets are by far the most important policy they could pass to support a recovery. The CARES Act granted an unemployment benefit increase of $600 per week. The result? A mass increase in spending power for those experiencing unemployment — which was almost entirely at the bottom end of the income spectrum. This was an incredible boost to the U.S. economy, with consumer spending increasing 10 percent after the CARES Act was passed.
If Biden and Trump want an economic recovery framed around the lower and middle class — who are by far hurting the most — they ought to increase disposable income specifically by concentrating all tax cuts at the bottom half of the current tax brackets, which neither intend to do.
Nonetheless, these plans are what we have to choose from. Trump’s plan is the ideal recovery vehicle from the free market perspective. But this does not make it the best, or even ideal. Even though we know Trump’s stance on regulation and tax cuts, he does not make it entirely clear how that’ll fit into this type of environment, especially when the world is still without a coronavirus vaccine.
Meanwhile, Biden’s multi-trillion dollar infrastructure spending plan is key to an effective recovery. In fact, Moody’s Analytics, a respected Wall Street research firm, predicted that Biden’s plan would create 7 million more jobs when compared to Trump's, and an overall faster economic recovery.
Although Biden’s vision is flawed in many ways, and could have unexpected consequences, it may be the best we have.
To get the day's news and headlines in your inbox each morning, sign up for our email newsletters.