NEW YORK CITY: Joe Biden has consistently held a wide polling lead over US President Donald Trump ahead of Novembers election.
But, despite Trumps botched response to the COVID-19 pandemic – a failure that has left the economy far weaker than it otherwise would have been – he has maintained a marginal edge on the question of which candidate would be better for the US economy.
Thanks to Trump, a country with just 4 per cent of the worlds population now accounts for more than 20 per cent of total COVID-19 deaths – an utterly shameful outcome, given Americas advanced, albeit expensive, healthcare system.
DEMOCRATS PRESIDE OVER FASTER GROWTH
The presumption that Republicans are better than Democrats at economic stewardship is a longstanding myth that must be debunked.
In our 1997 book, Political Cycles and the Macroeconomy, the late (and great) Alberto Alesina and I showed that Democratic administrations tend to preside over faster growth, lower unemployment, and stronger stock markets than Republican presidents do.
In fact, US recessions almost always occur under Republican administrations – a pattern that has persisted since our book appeared.
The recessions of 1970, 1980-1982, 1990, 2001, 2008-2009, and, now, 2020 all occurred when a Republican was in the White House (with the exception of the double-dip recession of 1980-1982, which started under Jimmy Carter but continued under Ronald Reagan).
Likewise, the global financial crisis of 2008-2009 was triggered by the 2007-2008 financial crisis, which also occurred on the GOPs watch.
WHY REPUBLICAN POLICIES LEAD TO RECESSIONS
This tendency is not random: Loose regulatory policies lead to financial crises and recessions. And, compounding matters, Republicans consistently pursue reckless fiscal policies, spending as much as Democrats do, but refusing to raise taxes to make up for the resulting budget shortfalls.
Owing to such mismanagement under the George W Bush presidency, President Barack Obama and Vice President Biden inherited the worst recession since the Great Depression.
In early 2009, the US unemployment rate surpassed 10 per cent, growth was in free fall, the budget deficit had already exceeded US$1.2 trillion, and the stock market was down almost 60 per cent.
Yet, by the end of Obamas second term in early 2017, all of those indicators had massively improved.
In fact, even before the COVID-19 recession, US employment and GDP growth, as well as the stock markets performance, were better under Obama than under Trump.
Just as Trump inherited millions from his father, only to squander it on business failures, so he inherited a strong economy from his predecessor, only to wreck it within a single term.
MARKETS SEEM TO FAVOUR A BIDEN PRESIDENT
The rally in equity prices this past August coincided with a hardening of Bidens polling lead, suggesting that markets are not nervous about a Biden presidency, or about the prospects of a Democratic sweep of Congress.
The reason is simple: A Biden administration would be unlikely to pursue radical economic policies. Biden may be surrounded by progressive advisers, but they are all fully within the political mainstream.
Moreover, his vice-presidential pick, US Senator Kamala Harris of California, is a proven moderate, and most of the Democratic senators who would be seated in a new Congress are more centrist than the left wing of their party.
Yes, a Biden administration might raise marginal tax rates on corporations and the top 1 per cent of households, which Trump and congressional Republicans cut merely to give wealthy donors and corporations a US$1.5 trillion handout.
But a higher tax rate would result in only a modest hit to corporate profits. And any costs to the economy would be more than offset by closing the loopholes that allow for tax avoidance and shifting profits and production abroad, and with Bidens proposed “Made in America” policies to bring more jobs, profits, and production home.
BIDEN HAS A PLAN FOR JOBS, GROWTH AND MARKETS
Moreover, while Trump and his fellow Republicans have not even bothered to formulate a policy platform for this election, Biden has proposed a suite of fiscal policies designed to boost economic growth.
If Democrats take control of both houses of Congress and the White House, a Biden administration would pursue a larger fiscal stimulus targeted at households, workers, and small businesses that need it, as well as job-creating infrastructure spending and investments in the green economy.