Investor anxiety about a Biden presidency is misguided, writes Conor Sen, with Trump’s approach to economic growth falling short even before Covid-19
Investor anxiety about a Biden presidency is misguided, with Trump’s approach to economic growth falling short even before Covid-19Joe Biden’s growing lead in the US presidential polls combined with recent stock-market turbulence has some Wall Street observers wondering if markets are getting nervous about the odds of Democrat victories in November.
Thinking about what candidate would be best for growth starts with identifying the biggest problem facing the US economy. Ever since the financial crisis — and especially with the onset of the coronavirus pandemic — the economy has been held back by a lack of aggregate demand. That’s led to a host of negative effects.Low inflation, which caused the Federal Reserve to consistently undershoot its inflation target, holding back growth.
The ratcheting up of the trade war served mostly to depress economic growth and led businesses to limit new investments amid the uncertainty. Conditions did improve for workers somewhat, as unemployment fell to generational lows. Minimum-wage increases in many cities and states helped with earnings growth for some service workers, and it did seem that inequality was beginning to narrow slightly.
What the US needs to increase economic growth and reduce inequality is higher levels of government spending and a tax code more favourable to workers, which is what Biden seems to be promising. Given the evidence throughout the developed world over the past several years, there shouldn’t be a partisan debate over whether the federal government should spend more money — just over how to spend it.
The Democrat-controlled House of Representatives passed a $3-trillion package in May to do more, though Republican Senate majority leader Mitch McConnell put it on hold, pledging to work on a package in July.
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