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Bidenomics: Is the Democrat candidate a radical in moderate's clothing?

Tom Rees
·7-min read
Democratic candidate Joe Biden -  Kevin Lamarque/REUTERS
Democratic candidate Joe Biden - Kevin Lamarque/REUTERS

Joe Biden is riding high in the polls with ten weeks to go before the US election - but one number will furrow brows in his camp more than any other.

Donald Trump is given a big thumbs down on his Covid-19 handling, foreign policy, the direction of the country and overall job approval. But even during the biggest economic crisis in living memory, Americans back his captaining of the US economy.

Trump’s economy approval rating remains in positive territory at +8, according to YouGov. More concerning still for Camp Biden is that just 34pc of Americans believe the economy would get better under his presidency. A total of 39pc fear it would get worse.

If “the economy, stupid” mantra still holds strong, November’s election could be tighter than Biden’s current nine-point lead suggests. Can the former vice president get voters to back Bidenomics?

Despite his reputation as a moderate who can reach across the aisle, Biden’s platform is seen by experts as the most extreme proposed by a Democratic presidential challenger in decades. The candidate has been forced to respnod as his whole party shifted leftwards.

Trump vs. Biden 2020 polling live
Trump vs. Biden 2020 polling live

“If we compare to previous Democratic plans or Trump’s plan, it is a pretty radical change,” says Stephen Gallagher, US economist at Société Générale.

“But if we compare to the offering of the other Democratic candidates, it is more moderate compared to Bernie Sanders, Elizabeth Warren or even Kamala Harris.”

There was a fairly serious risk that the shift would have been even more crashing had the man Trump derides as “Sleepy Joe” not come out on top in the primaries, Gallagher says.

Four years of Trump have pushed the Democratic Party further left as the country becomes increasingly polarized. Biden has followed his party, being forced into a number of key pledges to curry favour with left-wing Democrats who have grown in stature.

The field of candidates in this year’s Democratic primaries have responded to the popularity of the party’s leftists, such as firebrand socialist Bernie Sanders and liberal policy wonk Elizabeth Warren. Ultimately Democratic voters opted for a candidate who they believe is best-placed to defeat Trump - electability was a top concern, polling suggests - but the race has left its mark on Biden’s platform.

Perhaps most important for the economy has been the former vice president’s promise to do “whatever it takes” to tackle Covid-19.

“I would shut it down. I would listen to the scientists,” he said last month. “In order to keep the country running and moving, and the economy growing, and people employed, you have to fix the virus.”

States rather than the president ultimately have the power to shut down and reopen their economies, as Trump has found to his frustration. But a new Oval Office stance on the virus could still be significant for the economy.

Beyond Covid, Biden has a number of leftist policies he claims will help America “build back better”.

Biden (left), Sanders (centre) and Harris (right) during a presidential debate - MIKE SEGAR/ REUTERS
Biden (left), Sanders (centre) and Harris (right) during a presidential debate - MIKE SEGAR/ REUTERS

He wants to almost double the federal minimum wage to $15 (£11.27) an hour, up from $7.25. Many states already have a higher minimum wage but Biden is seeking to bring the US closer to pay floors seen elsewhere. The US has one of the lowest minimum wages compared to median and average pay among developed countries, lagging behind the UK, Australia, France, Germany, Spain and Japan.

“It’s going to hurt more rural populations where the minimum wage is not nearly that high and it would be an abrupt change,” says Gallagher.

“For New York City, Los Angeles or Chicago it’s probably not as radical.”

Workers will also be bolstered by his plans to make it easier to organise unions and collectively bargain, although some voters are likely to fear this will hit the country’s famously dynamic labour market. He wants universal paid sick days and 12 weeks of paid family and medical leave, while social security payments will be $200 higher per month.

US presidential election poll Donald Trump Joe Biden
US presidential election poll Donald Trump Joe Biden

Biden has promised to create 5m new jobs in manufacturing and innovation and has vowed to spend $2 trillion over four years on clean energy infrastructure, aiming for a carbon-zero power industry by 2035. He has promised no new taxes on those earning less than $400,000, while Trump’s corporate tax cuts will be partially reversed. The corporate tax rate will rise from 21pc to 28pc.

“Basically it’s going to be the wealthy that are going to be paying the tax rises and you get more income for the poorer people,” says James Knightley, ING chief international economist.

“That could be reminiscent of the late Nineties, when it actually generated a pretty good economy, because you get the big investment projects coming through like green energy and you get lower income households feeling more of the benefit.”

Trade policy is likely to become less combative while experts say the tech titans could face a clampdown amid rising competition worries.

Biden has not made tech regulation a key plank of his campaign as rivals such as Warren did, but the Democratic party has decisively shifted towards stricter rules on Silicon Valley behemoths.

Former Presidential candidate and Biden rival Elizabeth Warren had promised to take on big tech - Erin Kirkland/ Bloomberg
Former Presidential candidate and Biden rival Elizabeth Warren had promised to take on big tech - Erin Kirkland/ Bloomberg

Sam McGowan of Beacon Policy Advisors, a research firm focused on Washington, says a Biden administration is likely to reflect a growing scepticism of Silicon Valley.

“Going after tech companies is a major priority for the progressives,” he says.

“If Biden wins, there’s going to be a lot of influences out there that are going to shape the kinds of the policy that they’re gonna put in place. And I really think the national conversation is gonna shift towards more stringent enforcement.”

McGowan says that even if a Biden administration does not aim to break up Big Tech, it will certainly make predatory acquisitions harder and enforce competition. This could be good for the economy by helping start-ups to thrive.

However, Biden’s left-leaning agenda faces key hurdles. The 77-year old needs to win big against Trump to push through the most radical parts of his agenda.

The Democrats currently hold the House of Representatives but the other half of Congress, the Senate, is controlled by the Republicans. Many of Biden’s economic plans would be scuppered unless the Democrats win the three or more seats needed to take the Senate.

“One question is whether he might be limited by Congressional opposition. The battle for Senate control looks tight,” says Philip Shaw, Investec economist.

Knightley says: “If Biden gets a clean sweep and the Democrats win the House and Senate, we are going to see a very significant shift in policy. Much more taxation, more spending and importantly more regulation of energy, financial services and big tech.”

His ambitions could also be limited by the state of public finances he inherits. Trump was running high deficits at close to 5pc even before Covid struck and sent public debt soaring across the world.

“When we get in, the pantry is going to be bare,” warned Ted Kaufman, a leading figure in Biden’s transition team.

“When you see what Trump’s done to the deficit… forget about Covid-19, all the deficits that he built with the incredible tax cuts. So we’re going to be limited.”

Economists also argue that his platform could be harmful for the economy in the longer term.

Gallagher says Biden’s policies would slow the economy or limit its potential, despite rising in popularity among voters.

“It’s not until the economy slows that these voters will abandon their support for all these changes,” he says, highlighting Biden’s healthcare and energy plans.

Shaw adds that Biden’s tax pledges could have a significant impact on investor confidence, while the roaring recovery on the US stock market could be derailed by a big antitrust crackdown.

Biden has framed the 2020 election as a “battle for the soul of the nation”. His plans would be transformative for the world’s largest economy - but polling suggests Americans may be reluctant to give up on Trump’s vision just yet.