With the economy cited as a top issue for voters in the 2020 presidential election, many are wondering what an economy under President-elect Joe Biden will look like.
James W. Hughes, University professor and dean emeritus of the Edward J. Bloustein School of Planning and Public Policy, discussed the economic steps that Biden will take and how his approach compares to that of President Donald J. Trump.
Hughes said much of what will get done depends on who has control of the Senate. If the Democratic Party wins the majority, there will be greater innovation in a wide variety of activities, and if Republicans win the majority, they will have the potential to drastically slow down the Biden administration’s progress, he said.
“A key (goal of the Biden administration) ... is infrastructure investment,” Hughes said. “It’s an area where you can get bipartisan agreement ... Both Republicans and Democrats want more infrastructure (and) realize that we have a deteriorating infrastructure nationally. But the question over the past four years was … ‘how are you going to pay for that?’”
He said one of the three main components of infrastructure is energy investment. For instance, the Biden administration will direct more of its efforts toward investing in clean and renewable energy, whereas the Trump administration has focused more on carbon-based energy.
The other two components of infrastructure are transportation and broadband telecommunications, Hughes said. After identifying infrastructure goals to accomplish, the next step for an administration is to figure out how they want to fund these investments, he said.
“The general philosophy (of the Biden administration) will be (that it) will tax those sectors of both the economy and households that can afford it,” Hughes said. “(Including) households with incomes above $400,000 (and) raising the corporate tax rate from the low level it is now (but) not going back to where it was before some recent tax changes.”
He said there will always be objections to the $400,000 threshold, but the tax rate would not be especially high at that level of income because there would be a graduated income tax.
The Trump and Biden administrations have different philosophies when it comes to taxes and investments, Hughes said.
“(Trump’s philosophy) is to cut taxes and let the private sector make the needed investments,” he said. “(Biden’s philosophy is to) have raised taxes (and) increased revenues, and the government will make investments that are deemed crucial for the future economy of the country.”
Two of the largest capital investment programs in history, former President Dwight D. Eisenhower’s Interstate Highway System and former President John F. Kennedy’s space program, were government-directed investments and had substantial long-term payoffs, Hughes said.
“So that's different from a totally free-market approach of (saying that) private companies are better at picking winners and losers, (which) was the other philosophy of the (Trump) administration,” he said.
Hughes said he believes there are many business people who lean Republican and would support these tax increases if they felt confident that the money was being used wisely, but there is always a fear among both parties that tax revenue will be used to support partisan positions or individuals.
Hughes also said there are strong parallels between the economy that was inherited by former President Barack Obama's administration and the economy that will be inherited by the Biden administration.
“When ... Obama took office, he was coming in at the time of the (2007-09) recession, (which) was the worst recession since the Great Depression,” he said. “(With) Biden coming in, it's the new worst recession since the Great Depression in terms of its severity.”
The issue at hand is the second surge of the coronavirus disease (COVID-19) pandemic, Hughes said. Aside from the threat it poses to national health, there is also fear of a second shutdown, which could potentially cause further damage to the economy, he said.
“We have a number of individuals who have been grievously harmed by the recession, and they need continued help until the economy recovers,” Hughes said. “There's agreement there, but the disagreement currently ... is how big should (the stimulus) package be?”