Saturday 31 October 2020 2:46 pm

US election: Trumpism won the argument on US economic policy

Donald Trump swept to victory in the 2016 election promising an economic nationalist policy platform that would rejuvenate American industry and restore the country’s disenfranchised working class.

Some of this platform included trade protectionism – which he followed through with by starting a trade war with China and by slapping tariffs on EU countries – but much of it centred around large-scale infrastructure plans and high amounts of fiscal spending.

This plan, not withstanding the ad hoc tarrifs, was in many ways quickly spurned in favour of more traditional Republican economic policy.

While his former senior advisor Steve Bannon wanted Trump to invest hundreds of billions of dollars on capital spending and to raise taxes on the rich, he instead went in the other direction.

The President listened to establishment GOP figures and implemented sweeping tax cuts for the top income earners and lowered corporation tax.

He also slashed environmental and labour regulations, with eight federal regulations being cut for every new one added.

However, in any case Trump’s economics have still resembled a far more protectionist bent than previous presidents, with his “America First” rhetoric reigning supreme.

His electoral success and the rising influence of the Democrats’ progressive wing has had a material impact on Joe Biden’s policy platform in the 2020 election, with many experts arguing Trumpism has won the economic argument.

Biden’s economic plan is based around policies to boost the American manufacturing sector, strengthen Made in America provisions and be more combative toward China.

Dan Alpert, US economic commentator and investment banker at Westwood Capital, said a Biden presidency would in some ways embody Trump’s 2016 promises.

“Biden has gone and adopted much of what we would have hoped Trump would have done in his first term,” Alpert said.

“In particular, broad infrastructure initiatives and a more common sense to trade especially those industries that are most impacted by trade with mercantilist countries.

“Not only is he advocating for infrastructure, but he understands that if we’re going to open the cheque book for large scale infrastructure spending he understands that spending can’t leak abroad.”

The former Vice President has promised tax credits for companies that invest in plant and equipment in the US, to close loopholes that allow companies to offshore labour, ensure all federal government procurement spending goes to American goods and to create a new “Made in America” office in the White House.

This will go alongside a large-scale infrastructure programme and significantly increased domestic research and development spending.

In recent discussions around policy, he has been speaking in trillions of dollars of spending and not billions.

The bulk of this will be paid for by raising the top rate of income tax to 39.6 per cent and by raising corporation tax from 21 per cent to 27 per cent.

Presidential Candidate Joe Biden Delivers Remarks In Milwaukee, Wisconsin
Democratic presidential nominee Joe Biden departs after speaking at Milwaukee Mitchell International Airport on October 30, 2020

Research fellow at the Levy Economics Institute of Bard College Marshall Auerback said Biden understands the need to respond to the electoral backlash against globalism that was embodied by Trump’s election and Bernie Sanders’ unexpected rise to stardom.

“[Biden’s term] is definitely going to be titled in the direction of economic protectionism if he wins – Trump has won that battle,” Auerback said.

“Biden’s very concerned about seeing about being seen as being soft or vulnerable on China and I think also that with Trump it’s the usual thing – there’s a kernel of truth masked behind a husk of lies or misrepresentations.

“Too many people adopted the Apple model – they said we’ll outsource all the manufacturing to Asia and we’ll retain the software at home and that’s going to be a perfectly viable model.

“That’s turned out to be nonsense and it’s eviscerated the middle class.”

The President, meanwhile, has provided few details about what policies he would implement if re-elected.

He has maintained some of the rhetoric around keeping manufacturing jobs in America, but has not provided any route to this beyond maintaining tariffs on China.

This is a tactic that appears to not have backfired, with figures showing that tariffs on steel has led to a loss in manufacturing jobs after a small rise in 2018.

Trump has also talked vaguely about implementing more tax cuts.

Florida Senator, and former Florida Governor, Rick Scott is a Trump loyalist and is seen by some as a potential successor for the president at the top of GOP politics.

In an interview with City A.M., he gave some details about what a Trump economic platform could look like as he called for lower taxes and for people to prioritise buying American goods.

“I think Americans will buy American goods or buy goods from a democracy,” he said.

“As people learn more about the atrocities of these countries, especially China, they’ll stop buying their goods.”

On tax, Scott said: “I don’t want any tax increases as a matter of fact I want taxes to go down, I want our government to be a government that solves problems so you don’t have to pay for things,” he said.

“What I would do is constantly reduce [income tax], every year I would figure out how I could look at how do you drive down taxes.” 

It’s clear that there are stark differences between Biden’s economic approach and Trump’s, but what is important to note is the direction of travel.

A squeezed middle class has seen the quality of jobs in the US declining since the 1990s, according to Cornell University’s Job Quality Index, and Biden has understood the need to correct this.

One sizable difference between Trump and Biden is that the Democratic candidate has linked this grassroots economic revival with planning for a carbon-free future.

Biden’s capital works spending will invest heavily in renewable energy, with his infrastructure programme also skewed toward projects that are carbon neutral.

Former Bernie Sanders adviser Robert Hockett said Biden’s plan was a sign that he had adopted many aspects of Alexandria Ocasio Cortez’s controversial Green New Deal.

Hockett, who has been tipped to be a potential appointee somewhere in a Biden government, helped write the Green New Deal alongside Ocasio Cortez.

“All of his ‘building back better’ talk which he’s been doing  – which is a beautiful slogan – is basically the Green New Deal,” he said.

“If you look what he’s planning on doing, and the constant talk about the need of rescuing the planet and get down to net zero carbon emissions really quickly, this suggests what he has in mind for that two trillion of spending is salutary, it’s quantified investment instead of buying potato chips – it’s not going to be a sugar high.

“It’s very much focused on environmental rescue.”