Jim Power, Economist, Aviva

It is generally accepted that US Election 2020 is possibly the most crucial presidential election in generations, if not in US history.

Here we share some of the main points from Jim Power, Economist, Aviva who gives his personal assessment of the US Presidential election and what Joe Biden’s Presidency means for the world, the US and Ireland. For full article click Election 2020 

 

The election of Biden may not result in the reversal of these trends, but perhaps it might just slow some of them down. It is also important to bear in mind that Biden won narrowly, and on 20th January next he will take over a very divided and fractured country.

Trump leaves a mixed legacy…

Somewhat unusually for a politician, President Trump delivered a considerable amount of what he promised to deliver:

He has cut corporation and incomes taxes;

he cut red tape for business;

he has clamped down on immigration and some of the ‘wall’ has been constructed;

he has taken on China in an aggressive manner;

and he has sought to re-negotiate or pull out of trade deals.

He also packed the Supreme Court with conservative judges. On the other hand,

he has failed to resolve the healthcare crisis;

he has failed to rein in the US trade deficit;

and the national debt has widened dramatically during his presidency, not helped of course by COVID-19.

This health crisis exposed the real lack of a social safety net in the US, and the need for massive investment in infrastructure.

Trump was basically anti-free trade and anti-globalisation and did not believe in multilateralism. He took the US out of the Paris Climate Accord, and is in the process of taking it out of the WHO. The UN and NATO could have been next.

What might we expect from a Biden Presidency…?

The new President Elect, Joe Biden, who is now 77 and will be 78 by the time of the inauguration on 20th January, came into this election with a long and experienced, albeit not particularly strong, political pedigree. His Vice-President Kamala Harris on the other hand, would possibly be more radical if she were to assume the presidency for some reason.

The big question now is what we can expect from a Biden presidency. The platform on which he built his 2020 election campaign was titled ‘Build Back Better’. This basically revolves around fostering economic recovery; improving infrastructure; bringing broader benefits to lower income communities and minorities; improving education, R&D, and the skills of the workforce; and creating a greener economy and society.

This overall agenda is set to include some of the following:

A €2 trillion investment in Green Energy to radically cut carbon emissions. This would be bad for the oil industry and fracking and would fly in the face of Trump’s environmental policies over the past 4 years. From a global perspective this would be good, and he will probably also re-engage with the Paris Climate accord.

A significant increase in long-term infrastructure investment, which would have a significant fiscal multiplier effect. This would start to correct for years of under-investment in infrastructure. This expenditure would be funded by tax increases, with his tax changes targeted to raise $1.4 trillion over his 4-year term.

His tax policies include an increase in the corporation tax rate from 21% to 28%; higher income taxes for those earning over $400,000; and higher capital gains taxes for the very wealthy.

An increase in the Federal Minimum Wage from $7.25 per hour to $15 per hour.

More support for small business, through grants and other mechanisms.

Universal pre-school education; tax credits for childcare; and free public university education for families who earn less than $125,000 per annum.

He seems to believe in a soft form of protectionism. This could involve bringing supply chains back home by adopting a ‘made in America’ government procurement policy; tightening of the rules on labelling of products; and the use of US steel for transport projects.

He would likely promote multilateralism and seek to rebuild the damaged relationship with the EU and other countries. However, given the popular support for Trump’s approach to China, he is unlikely to row back significantly on the tariff regime with China, or indeed the fractious relationship between the US and China that gathered momentum during Trump’s presidency. However, Biden is an internationalist, and hopefully he will seek to rebuild the damage done to US international relations over the past 4 years. This would be good for global trade, global growth, and perhaps global political stability.

He would likely adopt a more constructive approach towards immigration, although he will have to be mindful of the popular support for some of Trump’s approach to immigration.

For Ireland…

Arguably, a Biden victory would be better for Ireland than another 4 years of President Trump.

If the corporation tax rate is increased from 21% to 28%, this will make Ireland even more attractive for US multi-national investment. Given that post-Brexit, Ireland will be the only English-speaking country in the EU (excepting tiny Malta), so it could benefit from Biden’s tax policies.

Biden will likely engage more constructively with the EU, which would be good for bilateral trade, which would be good for the small, open, Irish economy.

In the context of Brexit, Biden would be better for Ireland. The speaker of the House, Nancy Pelosi, has said that the House would not ratify a UK-US trade deal, if the UK exit from the EU undermines the Northern Ireland peace process. Biden agrees with this perspective.

Biden also has Irish heritage, so his general approach to Ireland is likely to be warm and positive.