What does a Biden presidency mean for the economy?
With Joe Biden sworn in as President of the United States, the Democratic Party now controls the House of Representatives, the Senate, and the Presidency.
The Democrats’ victory in the Georgia Senate run-offs means Biden has greater scope to pursue his vision for America than previously anticipated.
But what exactly is the Biden agenda, what does it mean for the global economy, and will it impact your super? Let’s have a closer look at the Biden plan.
COVID: Much like his old boss, former president Barack Obama, Biden inherits a country in the midst of an emergency. For Obama it was the 2008 Global Financial Crisis. 13 years later, Biden faces a pandemic that has infected 23 million Americans and claimed almost 400,000 lives.
Responding to COVID-19 is expected to be his first course of action, with universal free testing and the roll-out of 100,000 vaccines within the first 100 days. Whether this will be enough to control the spread remains to be seen, and much of 2021 is a global waiting game, as countries try to bring the pandemic under control.
Jobs and the economy: Closely related to the public health issue of COVID is the economic impact. Biden supports an immediate $2,000 USD payment to struggling families and businesses as part of a $1.9 trillion USD emergency relief plan. More broadly, he is proposing an additional $200 USD in social security payments per month and supports raising the minimum federal wage to $15 USD an hour. All of the above is intended to jump-start the US economy.
Taxes: A Biden presidency wants to roll back Trump’s tax cuts, and for corporations and high-net worth individuals to pay “their fair share”. In practice that means increasing income tax rates for the ‘top end of town’ and closing loopholes in the US tax system.
International trade: Compared to Trump’s more isolationist policies, Biden is promising to take a multilateral approach, working with foreign partners to achieve trade and economic goals. That means rebuilding strained relationships with the EU and World Trade Organisation (WTO) while reducing US reliance on Chinese products, including medicines.
Healthcare: Biden supports the expansion of ‘Obamacare’ health insurance to 97% of Americans at a cost of $2.3 trillion USD over 10 years. While his response to the coronavirus pandemic has been the initial focus of his healthcare policy, there’s a long-term aim to finish the job that he and Obama started with the Affordable Care Act (ACA) in 2010.
Climate change and energy policy: A Biden presidency promises more stringent environmental oversight. A $1.7 trillion USD federal investment in green technologies research, net zero emissions by 2050, and re-joining the Paris Climate Accord points to both a significant investment and the reining in of less environmentally friendly business practices.
What does all this mean for me?
In November 2020, it looked like Biden’s Presidency would be hamstrung by Republican control of the Senate. The Georgia Senate run-offs and the two Democratic wins mean that’s no longer the case; the President has more leverage to pursue his agenda.
How that impacts the global economy and financial markets remains to be seen. Compared to the previous four years under the Trump administration we may expect higher taxes, more regulation and increased fiscal stimulus in the US.
While there’s no shortage of pundits discussing the impact of these measures, the reality is no-one really knows. The biggest story to come out of the 2020 pandemic, and the associated recession, is the split between the stock market and the broader economy. Simply put, shares have reached record highs while underlying economic factors have remained in the doldrums.
As always, we’d argue that investment is a long-term game, and it’s more important to be invested in a superannuation option that matches your risk tolerance than trying to beat the market.
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Any figures quoted are correct at the time of writing but may be subject to change.
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