Bidenomics

There is no doubt that this election was about the repudiation of Donald Trump and the ugliness he has brought out in this country. Civil rights and liberties were on the ballot, and people voted like their life depended on it, because it did. While those personal freedoms and rights took center stage, the economy got placed on the back burner. With Biden becoming President-Elect, it is important to understand his economic plan and how he will drive the country going forward. 

Covid Relief

One of the first prongs of Biden’s economic plan is tackling COVID-19. This virus yielded high unemployment and an increasing poverty rate, both seemingly without an end in sight. As fears of a second wave of COVID-19 continue to grow this fall, it is important to know how a Biden administration would handle the economic impact of such a surge in cases. Biden’s campaign website lists a three-pronged approach to dealing with the economic fallout of the virus (“The Biden Emergency,” 2020). The first is to enable the Defense Production Act. Created in the wake of both world wars, the Defense Production Act was formed to give the president leverage to “demand priority for defense goods production, requisition materials and property, expand government and private manufacturing capacity, ration consumer goods, fix wages and prices, force settlement of labor disputes, control consumer credit and regulate credit and loans, extend antitrust protections, and establish a voluntary reserve of private sector executives for emergency federal employment” (Else, 2020). This act mirrors the War Powers Acts and gives power to the president to take control of the economy in a time of crisis. Biden intends to use this act to the fullest extent to beef up testing and contract tracing capacity, increase the production of personal protective equipment (PPE), and make surge equipment and supplies available to new hotspot regions. (“The Biden Emergency,” 2020). In order to increase these various capacities, the Defense Production Act can provide additional personnel and manufacturing capabilities. In contrast, many experts have  criticized President Trump for his unwillingness to use this act in the spring when the virus’ first wave spread across America.

Biden’s second prong to his COVID-19 economic relief strategy is to pass additional legislation. The goal of this legislation would be to keep as many Americans on payroll as possible, and make whole workers who lost their jobs (“The Biden Emergency,” 2020). Further, this legislation would find ways to keep small businesses open, Biden has advocated for creating additional loans for small businesses, amounting to $377 billion. This money would provide for payroll, rent, and other costs associated with keeping small businesses up and running. In an effort to get this money out to workers and small businesses immediately, Biden would work with banks to give priority to small businesses. If the banks do not cooperate, he could utilize executive privileges similar to that granted to him in the Defense Production Act to force banks to give priority status to small businesses. His last piece of legislative action would be to enforce oversight on big corporations. In order for these corporations to receive taxpayer assistance, there would have to be commitments that the money goes towards the workers, not towards the executives or shareholders. 

Biden’s third prong is to encourage bipartisanship in Congress by bringing together congressional leaders (“The Biden Emergency,” 2020). This collaboration would be used to pass the legislation mentioned in the second prong as well as provide monetary assistance to students who didn’t receive stimulus checks, forgive students loans of at least $10,000, increase social security payments, provide paid sick leave, cover healthcare costs related to COVID-19, and provide monetary support to states who have been hit the hardest by this virus. 

Although some of these points seem lofty and, at times, vague, Biden touches on many key initiatives that individuals across the political spectrum have been calling on Trump to enact.

Taxes

Integral to Biden’s economic plan is how he intends to approach taxes. There are a number of policies that Biden plans to enact, including raising taxes on individuals with incomes over $400,000, raising corporate income taxes, and implementing a corporate minimum book tax (Watson et. al., 2020). Overall, Biden’s tax policy would plan to raise $3.3 trillion dollars in tax revenue over the next decade. Given the effects of the pandemic and economic downturn associated with the virus, the plan actually returns less revenue over the next decade than originally intended. Long term, the Biden tax plan actually will reduce gross domestic product by 1.62% (Watson et. al., 2020). 

Earning more that $400K a year puts said individual in the top 1.8% of income-earners, according to the IRS (Financial Samurai, 2020). By no means is this a small amount of money, but how rich does $400K a year make someone? For a family of four who pays a mortgage, after paying taxes, continually saving money into a retirement account, and paying for other expenses such as a car, tuition, phone plan, and other utilities, leaves approximately $3 a month for miscellaneous expenses. Having a decent house, paying for childcare, and paying for utilities each month is becoming more expensive in most places across the country. The reality is that $400K gives that family of four a comfortable lifestyle and one that many families in America crave. However, let’s not confuse a comfortable lifestyle with a rich lifestyle. I give this example to demonstrate that there is an increasing cost of living in this country. While Joe Biden is targeting the top 1% of income earners, how much will those taxpayers receive from the system to which they pay those increasing taxes? This is where many upper-middle class and rich fiscal conservatives bit their tongues and voted for the social issues that mattered to them, despite the fact it would cost them more money.  

The other side of the Biden tax plan is related to corporations. This plan calls for increasing the corporate tax rate to 28% and implementing a 15% minimum book tax on corporations. These two components are the heaviest hitters in Biden’s tax plan. While the income tax increase is definitely getting attention, the corporate tax changes will make up a bulk of the additional revenue. This increase in tax revenue from corporations will likely reduce long run output by 0.15% (Watson et. al., 2020). Given that the individual tax rate for those in the top income bracket is expected to rise in the next five years, due to provisions in existing tax legislation, there is no effect on long run growth that has not already been calculated. However, the increase in the corporate rate will affect long run growth. 

Manufacturing

The last main prong of Biden’s economic plan is to increase manufacturing. Biden’s “Made in America” plan is meant to rival Trump’s “America First” policy. The effect of this plan would be to increase investments in American-made goods and American corporations. To enact this, Biden plans to put “$400 billion into procurement and $300 billion into research and development with the aim of creating 5 million new jobs” (Moore, 2020). This segment is all about beefing up manufacturing. Biden believes that in order to achieve an elevated state of economic output, we must focus on manufacturing. On his campaign website, Biden details how manufacturing has been the backbone in the American economy. He plans to retool smaller manufacturers to be more relevant to the current economy and to retrain workers, especially women and people of color, in order to enable them to get these manufacturing jobs.

Conclusion

Across the country, crowds broke out celebrating the election of president-elect Joe Biden. The collective sigh of relief taken around the world was not only long waited for, but also was sense of collective relief for many Americans. The social issues on the ballot took the forefront in this election, but when the dust settles and Joe Biden is in the oval office, it is important to understand how his economic plan will impact the country.

Sources

“The Biden Emergency Action Plan to Save the Economy.” Joe Biden for President: Official Campaign Website, 3 Aug. 2020, joebiden.com/the-biden-emergency-action-plan-to-save-the-economy/. 

“The Biden Plan to Ensure the Future Is ‘Made in All of America’ by All of America's Workers.” Joe Biden for President: Official Campaign Website, 7 Oct. 2020, joebiden.com/made-in-america/. 

Else, Dan. “The History of the Defense Production Act and What It Means for COVID-19.” War on the Rocks, 13 Apr. 2020, warontherocks.com/2020/04/the-history-of-the-defense-production-act-and-what-it-means-for-covid-19/. 

Financial Samurai, et al. “Surviving Off A $400K Income Biden Deems Rich Enough For Higher Taxes.” Financial Samurai, 13 Oct. 2020, www.financialsamurai.com/400k-income/. 

Moore, Elena. “Trump's And Biden's Plans For The Economy.” NPR, NPR, 16 Oct. 2020, www.npr.org/2020/10/16/919162392/trumps-and-biden-s-plans-for-the-economy. 

Watson, Garrett, et al. “Details and Analysis of Biden's Tax Plan.” Tax Foundation, 22 Oct. 2020, taxfoundation.org/joe-biden-tax-plan-2020/.