by Geoffrey Churchman
Politicians often don’t do in office what they say they’ll do during election campaigns.
In NZ, Jacinda & Co. have achieved very little of what they promised in 2017, mainly because they didn’t think things through enough, but also because of their ideological belief that all problems can be solved by increasing government bureaucracy, increasing taxes and passing more restrictive laws.
In Kapiti, nearly everyone who reads beyond the Mainstream Media knows the present mayor has done nothing about the things he campaigned on — in fact on the subject of empowering the Community Boards, he has done the exact opposite, which was his real intention; like everything else that promise was just something to say to sound good to voters.
In the U.S., although much of what Biden et al said last year would also have just been platitudes to sound good, enough is reasonably predictable about what the Democrats in Washington D.C. will do.
The important thing for those outside America is the impact on trade. As can be seen in the table above for the year ended June 2019, although the USA is still the World’s biggest economy, it was only NZ’s third largest export market — just above the EU collectively which at that time included the UK. China is easily the biggest.
This means that in the scheme of things, America matters, but not hugely so.
What affects exporters is how easy is it to sell to foreign markets — firstly, barriers placed on products; and secondly, how strong the local economy is, affecting consumers’ buying power.
For America, the latter is not looking good in the short term. Up until a year ago the American economy was growing strongly; now it is in recession: 140,000 jobs were lost in December. Only about 55% of the jobs lost in March and April have returned. That is significant.
Because of the Democrats’ opposition to fossil fuels, energy costs are sure to go up, In the case of oil, a barrel of West Texas Intermediate crude is now over $US 53. Two months ago, WTI crude was about $40 a barrel. That’s a 32 percent increase in two months.
The Democrats’ enthusiasm for lockdowns, which Trump resisted, means economic problems ahead for a lot of workers and probably for the whole of this year. Those who make their living as bus drivers, bartenders, waiters, hair stylists and boutique store clerks, among thousands of other jobs, make up 50% of all jobs and 45% of U.S. gross domestic product. This is the part of the economy affected by the lockdowns.
Since the election in November, the $US has fallen about 10% in value — that slide could continue. Again it’s not helpful for NZ exporters to the U.S. But because Trump pursued the protectionist policies that the Democrats traditionally have, there may not be a lot of difference ahead in that.
Biden’s key economic policies
The assumption is that Biden — or Harris — can get all of it through Congress. It’s one thing for Biden on day one to sign Executive Orders reversing all the ones Trump made, it’s another to get Bills passed when there are thin majorities in both the House and Senate.
- Raise an additional $4 trillion in tax revenue by increasing top tax rate to 39.6%, taxing capital gains at ordinary rates and raising the corporate tax rate to 28%.
- Forgive student loan debt and make college free for those making up to $125,000 [about $NZ 175,000].
- Raise the minimum wage to $15 an hour [about $NZ 21] and repeal “right to work” laws.
- Expand “Buy American” policies through government purchasing, while using subsidies, federal matching, and incentives to make American products more competitive.
- Invest $1.3 trillion in infrastructure over 10 years [this sounds like Trump’s intention, but there are some differences]
- Spend $2 trillion on clean energy during first term as president.
- Provide health insurance coverage for 97% of Americans in 10 years.
The $1.3 trillion to be spent on infrastructure over a decade includes $50 billion in his first year in office on repairing roads, highways, and bridges, $20 billion on rural broadband infrastructure, $400 billion over 10 years on a federal new agency to conduct clean energy research and innovation, $5 billion over five years on electric car battery technology, and $10 billion over 10 years on transit projects that serve high-poverty areas.
Biden says he supports the idea of a Green New Deal, and that the U.S. will rejoin the Paris agreement to reduce fossil fuel consumption; he wants the U.S. to have a carbon-emission-free power sector by 2035 and reach ‘net-zero’ emissions no later than 2050.
He also wants to establish a new ‘Environmental and Climate Justice Division’ within the Justice Department. In order to build a 100% clean energy economy and create millions of “good union jobs,” he plans to make investments in new infrastructure, public transit, clean electricity, the electric vehicle industry, buildings and housing, and agriculture.
In all, his climate plan will require federal spending of $2 trillion over his first term. He doesn’t want a ban on fracking, but will ban new permits for oil and gas drilling on federal land and offshore, plug abandoned oil and natural gas wells, and restore and reclaim former mining sites.
Revitalizing the middle class and making it more racially inclusive was the cornerstone of Biden’s campaign. “This country wasn’t built by Wall Street bankers and CEOs and hedge fund managers. It was built by the American middle class,” he said at a rally beginning his campaign.
The American ‘Middle Class‘
Biden cast himself as a moderate with sensible, achievable plans rather than the leader of a revolution against economic inequality. “I don’t think 500 billionaires are the reason why we’re in trouble,” he said in a speech at a Brookings Institution event in 2018. “The folks at the top aren’t bad guys” [Given who some of them are such as Bill Gates, Jeff Bezos, Sergey Brin, Larry Page, Jack Dorsey and Mark Zuckerberg, that is highly debatable.]
He believes in a growing and thriving middle class, albeit more in terms of values and lifestyle rather than an income group.
According to Pew Research, 52% of American adults lived in middle-income households in 2018: adults whose annual household income is two-thirds to double the national median after adjustment for household size. The annual income range for a middle-class household of three in 2018 was $48,500 to $145,500.
The U.S. has a proportionally smaller middle class than most developed economies, and the income disparity between sectors in the middle class is growing, according to Pew. Moreover, while the top 20% have fully recovered from the Great Recession of the late 2000s/early 2010s, the middle class is below its previous peak in 2007.