What Does Joe Biden Say About The Economy
Biden claims that rather than a V-shaped recovery, the US is heading for a K-shape where wealthy Americans are recovering quickly but those on lower income have not.
Biden said he would increase corporate taxes and create more jobs by bringing manufacturing back to the US that would “create an additional $1 trillion in economic growth”.
In this plan, the government would spend $400billion to buy American products and services, while $300billion would go towards research and development.
Biden’s climate change plan, called the “Clean Energy Revolution,” would invest $2 trillion into combating the planet’s greatest threat.
Oil Production And Imports
The increase in crude oil production that began under Obama continued under Trump, soaring to new record highs before COVID-19 contributed to a decline in 2020.
The 4.1 billion barrels produced last year were still more than in any year other than 2019, when nearly 4.5 billion barrels were produced, according to the Energy Information Administration. Even with the down year, crude oil production was up 27.6% in 2020 compared with 2016.
Increased domestic production under Trump led to fewer annual crude oil imports, which were down 25% in 2020 from four years earlier. The total number of imported crude oil barrels in 2020 2.15 billion was the lowest total since 1991.
However, while the U.S.again became a net exporter of petroleum products last year, it remained a net importer of crude oil, specifically, the EIA said.
Editors note: In January, we plan to publish our first quarterly report on President Joe Biden.
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The Economy Remains In A Massive Hole
Seven months into the crisis, COVID-19 and the Trump Administrations failure to control it continue to constrain the recovery. While the economy, with the help of the CARES Act, has made critical progress since Spring 2020, output and employment are still extremely depressed relative to their levels before the pandemic. And with labor market gains slowing and economic hardship on the rise, a brutally uneven and needlessly slow recovery will be all but guaranteed unless more fiscal support is delivered immediately.
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Trade War ‘disaster’ With China
Trade policy is where the president wields the most economic power, as Congress has over the years delegated negotiating authority to the presidents office, according to Menzie Chinn, professor of public affairs and economics at the University of Wisconsin, Madison. Chinn documented the trade war saga on his macroeconomic policy blog Econbrowser.
Trump exercised this power almost immediately during his first years in office and even went so far as to use national security as a basis for trade barriers with China — something that no president has done in recent times.
Ultimately, the tit-for-tat trade war that Trump waged with China was lost by the U.S., economists say, and data on trade deficits confirm.
Trumps dramatic trade war upended decades of policy, and kicked off with failed meetings with Chinese leaders in 2017. After the talks disintegrated, Trump initiated the trade war by imposing tariffs on all imported washing machines and solar panels in early 2018. He then announced 25% tariffs on steel imports and 10% tariffs on aluminum. China retaliated with tariffs of up to 25% on more than 100 U.S. products including soybeans and airplanes. The sporadic, retaliatory trade-off battles waged on for years, and dragged other countries that were trying to remain competitive in as well.
By the end of his term, the trade deficit will be larger in absolute terms than it was when he came to office, Chinn told ABC News.
Gross Domestic Producta Deep Recession
The widest measure of economic activity â gross domestic product â measures the value of the goods and services produced in the country. It typically grows between 2% to 3% per year after adjusting for inflation. Trumpâs first three years were all within that range, but 2020 saw a deep decline. We donât have a full year of data yet, but the second quarter was the worst in records going back to 1947. Third-quarter data, which was released on Thursday, showed a partial recovery.
Additional development by Byron Manley
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Foreign Profits Dont Generate Domestic Investment Windfalls
The USCBC report claims that U.S. companies earn profits on their Chinese investment that they then funnel into increased American investment. But again, this assumption ignores the crucial distinction between economies where business investment is constrained by high capital costs and economies where investment is constrained by weak demand. Many multinational American companies are already sitting on huge hoards of cash for which they cannot find a productive use: that hardly seems to indicate that American businesses need foreign profits to fund even more investment at home.
This Is Trumps Doing Not Obamas
In rare moments when liberals admit a few not-so-terrible things have happened during Trumps presidency, they credit Trumps success to the continuation of a trend President Barack Obama began. Perhaps Trump did achieve the lowest African American unemployment figures in history, they say, but he was the beneficiary of Obamas legacy, when most of the economic hope and change really happened. Nothing could be further from the truth.
Over the past 40 years, the inflation-adjusted growth trend for the U.S. median weekly wage has been $4.05 per quarter. During the first three years of the Trump administration, it was a staggering $6.90 per quarter.* During the Obama years, median wages grew at the anemic rate of $3.20 per quarter.
But what if we cherry pick the last three years of the Obama era? We see growth of $5.08, more than a dollar higher than the historic trend. But that is the lone bright pixel in an otherwise dreary picture. And Trump has bested that by a mile.
The story grows quite interesting when we focus on wage earners in lower brackets. According to data from the U.S. Bureau of Labor Statistics, the 20-year growth trend for the 10th percentile weekly wage was $2.03 per quarter. For Trumps first three years, wage growth was $4.95.
Link to U.S. Bureau of Labor Statistics data.
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Narrowing The Inequality Gap
There is no disputing that major benchmarks of inequality narrowed on Trumps watch before the pandemic, largely due to the red hot, pre-COVID jobs market.
Not only was the US unemployment rate hovering near a half-century low before lockdowns were initiated the gap between the white unemployment rate and the African American and Latino unemployment rates had decreased to the narrowest on record.
Median household income adjusted for inflation was $68,703 in 2019, an increase of 6.8 percent from the previous year and the fifth consecutive annual bump, according to the Census Bureau.
The official poverty rate in 2019 was 10.5 percent the lowest rate observed since the Census started tracking it in 1959. Income inequality also decreased slightly in 2018 and 2019 by some measurements.
Meanwhile, as US Federal Chairman Jerome Powell said earlier this month, anecdotal evidence gathered by the US Federal Reserve through its Fed Listens series found that the robust job market was delivering life-changing gains for many individuals, families, and communities, particularly at the lower end of the income spectrum.
Rolling Back Regulations That Protect Worker Pay And Safety
President Trump and congressional Republicans have blocked regulations that protect workers pay and safety. Two of the blocked regulations are the Workplace Injury and Illness recordkeeping rule, and the Fair Pay and Safe Workplaces rule. By blocking these rules, the president and Congress are raising the risks for workers while rewarding companies that put their employees at risk.
On April 3, 2017, Trump signed a congressional resolution blocking the Workplace Injury and Illness recordkeeping rule, which clarifies an employers obligation under the Occupational Safety and Health Act to maintain accurate records of workplace injuries and illnesses. Recordkeeping is about more than paperwork. If an employee is injured on the job , contracts a job-related illness, or is killed in an accident on the job, then it is the employers duty to record the incident and work with the Occupational Safety and Health Administration to investigate what happened. Failure to keep injury/illness records means that employers, OSHA, and workers cannot learn from past mistakes, and makes it harder to prevent the same tragedies from happening to others. By signing the resolution to block this rule, Trump gave employers a get-out-of-jail-free card when they fail to maintain or when they falsifytheir injury/illness logs. Workers who could have been saved from preventable accidents on the job will have to pay the price with their health or even their lives.
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Section 201 Solar Panels And Washing Machines
In January 2018, the Trump administration announced it would begin imposing tariffs on washing machine and solar cell and module imports as the result of a Section 201 investigation.
We estimated the solar cell and module tariffs amount to a $0.2 billion tax increase based on 2018 import values and quantities of four 8-digit Harmonized Tariff Schedule subheadings, given on page 12 of this report. The United States imported 6.8 billion watts worth a value of $4.9 billion in 2018 under the four subheadings. The Biden administration extended the solar panel tariffs at a rate of 14.75 percent on imports above a 5 gigawatt exemption.
We estimated the washing machine tariffs amount to a $0.4 billion tax increase based on 2018 import values and quantities of six 8-digit Harmonized Tariff Schedule subheadings, given on page 8 of this report. The United States imported $1.3 billion worth of machines and $114 million worth of parts in 2018. For most of 2022, a tariff of 14 percent applies to in-quota washing machines and parts and a tariff of 30 percent applies to all subsequent washing machines and parts.
Tariffs on solar panels and washing machines currently remain in place under the Biden administration and account for $0.6 billion of the $75 billion in tariffs revenues, based on 2018 import values.
Taking Billions Out Of Workers Pockets By Weakening Or Abandoning Regulations That Protect Their Pay
In 2017 the Trump administration hurt workers pay in many ways, including acts to dismantle two key regulations that protect the pay of low- to middle-income workers: it failed to defend a 2016 rule strengthening overtime protections for these workers, and it took steps to gut regulations that protect servers from having their tips taken by their employers. These failures to protect workers pay could cost workers an estimated $7 billion per year.
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Impact On The Economy Deficit And Debt
The non-partisan Joint Committee on Taxation of the U.S. Congress published its macroeconomic analysis of the Senate version of the Act, on November 30, 2017:
- Gross domestic product would be 0.7% higher on average each year during the 2018â2027 period relative to the CBO baseline forecast, a cumulative total of $1,895 billion, due to an increase in labor supply and business investment. This is the level of GDP, not annual growth rate, so the economic impact is relatively minor.
- Employment would be about 0.6% higher each year during the 2018â2027 period than otherwise. The lower marginal tax rate on labor would provide “strong incentives for an increase in labor supply.”
- Personal consumption, the largest component of GDP, would increase by 0.6%.
The CBO estimated in April 2018 that implementing the Act would add an estimated $2.289 trillion to the national debt over ten years, or about $1.891 trillion after taking into account macroeconomic feedback effects, in addition to the $9.8 trillion increase forecast under the current policy baseline and existing $20 trillion national debt.
Trade Is More Than Ideology
The USCBC study concludes with the following:
Scaling back tariffs would likely benefit the US economy and create jobs. Even a moderate rollback in tariffs could increase economic growth and stimulate employment growth. Under our trade war de-escalation scenario, where both governments gradually scale back average tariff rates to around 12% , the US economy produces an additional $160 billion in real GDP over the next five years and employs an additional 145,000 people by 2025. US household income would be $460 higher per household as result of increased employment and incomes as well as lower prices.
Escalating trade tensions and significant decoupling with China would hurt the US economy further and reduce employment. Our trade war escalation and decoupling scenario sees the US economy produce $1.6 trillion less in real GDP terms over the next five years and results in 732,000 fewer jobs in 2022 and 320,000 fewer jobs in 2025. In addition to a significant near-term shock to economic output, long-term effects would permanently lower GDP, reflecting lower economic productivity. By the end of 2025, US households will have lost an estimated $6,400 in real income.
This is an admirably precise set of conclusions and projections about the supposed impact of their recommendations, but the USCBCs methodology does not support them. Their analysis focuses mostly on minor or irrelevant data and almost wholly ignores the key issues at play.
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Surpluses Are Usually The Consequence Of Suppressed Wages
This tendency to conflate unlike trade effects effectively misses the point. They do not ignore the impact of imports altogether, but their methodology seems to assume automatically that imports increase real household income by more than they reduce household income through direct job losses. Meanwhile, they simultaneously ignore the ways imports can repress wages or raise indirect unemployment, along with the indirect job losses caused by this wage suppression.
In nearly every country running large, persistent surpluses, the household share of GDP is lower than that of peer countries and trade partners. This isnt merely a coincidence. It is low wages relative to productivity that allows countries to run surpluses, and yet the USCBC analysis seems implicitly to deny that countries increase international competitiveness mainly by directly or indirectly reducing the wage share of production, or that when countries implement policies to improve what they deem international competitiveness, this is usually nothing more than a euphemism for policies that directly or indirectly suppress wages.
That is why they find that more trade can only result in higher real household income. They exclude the possibility that, to the extent a surplus country relies on lowering wages to become competitive enough to run its surplus, it must put downward wage pressure on its trade partners.
Income And Wealth Inequality
The New York Times editorial board characterized the tax bill as both a consequence and a cause of income and wealth inequality: “Most Americans know that the Republican tax bill will widen economic inequality by lavishing breaks on corporations and the wealthy while taking benefits away from the poor and the middle class. What many may not realize is that growing inequality helped create the bill in the first place. As a smaller and smaller group of people cornered an ever-larger share of the nation’s wealth, so too did they gain an ever-larger share of political power. They became, in effect, kingmakers the tax bill is a natural consequence of their long effort to bend American politics to serve their interests.” The corporate tax rate was 48% in the 1970s and is 21% under the Act. The top individual rate was 70% in the 1970s and is 37% under the Act. Despite these large cuts, incomes for the working class have stagnated and workers now pay a larger share of the pre-tax income in payroll taxes.
The share of income going to the top 1% has doubled, from 10% to 20%, since the pre-1980 period, while the share of wealth owned by the top 1% has risen from around 25% to 42%. Despite President Trump promising to address those left behind, the Tax Cuts and Jobs Act would make inequality far worse:
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Financial Markets Vs The Real World
Trump can accurately point to above-average financial market gains. Through November the S& P 500 had risen by an average of 14.34% per year during his term, slightly more than the 12.43% under Obama.
But those gains have largely been driven by rock-bottom interest rates, which drive investors into stocks in search of higher returns. And the benefits of those gains accrue largely to the most affluent Americans who own most of the stocks.
The President can also cite a higher-than-average 3.32% annual gain in real per capita disposable income. But that average conceals the extent of those gains that flowed to the affluent, who benefited disproportionately from his tax cuts.
As a candidate in 2016, Trump championed the beleaguered blue-collar workers he called the forgotten Americans. His policies have not closed the gap between them and economic elites.
Through the third quarter of 2020, Zandi says, the least wealthy 50% of Americans own just 1.9% of the nations net worth, while the top 1% own 30.5%. The surging pandemic promises make that disparity worse before Trump leaves office.
When the Labor Department issues the final monthly jobs report of his presidency in early January, Zandi expects it to show a renewed decline in employment. In the first quarter of 2021, as Trump yields power to Biden, the Wall Street firm JPMorgan predicts that economic output will shrink.