What kind of economic growth can we expect if Joe Biden wins the presidency in November and Democrats sweep Congress? And how does it compare to a hypothetical Trump victory and a Republican sweep? The boffins at Moody’s Analytics took a look at the likely impact of economic policy in both scenarios and came up decidedly bearish on Republicans:
The economic outlook is weakest under the scenario in which Trump and the Republicans sweep Congress and fully adopt their economic agenda. In this scenario…it is not until the first half of 2024 that the economy returns to full employment…unemployment remains persistently higher…labor force participation rate that never fully recovers to its pre-pandemic highs…real after-tax income does not change much during the president’s term…The economy suffers in Trump’s second term, as we expect he will double down on the foreign trade and immigration policies he pursued in his first term…The significant increase in tariffs during Trump’s first term—from an effective tariff rate of 1.5% when he took office to a peak of more than 6% just prior to the Phase One deal—acted like a tax increase on the U.S. economy, hurting U.S. manufacturers, transportation companies, and farmers in particular. More of the same is expected in Trump’s second term.
Whew. That’s pretty brutal. Here’s a comparison in brightly colored chart form:
In every possible category, a Democratic sweep is better for the country than any other scenario. Moody’s even projects that Democrats would be better for the budget deficit than Republicans.
You can read the full report here, but it’s pretty easy to summarize. If Democrats win, they’ll spend money to stimulate the economy out of its COVID-19 funk and this will help everybody. The spending will largely be financed by taxing the rich, which has only a small negative effect on the economy. But if Republicans win, they’ll keep the purse strings closed and instead pursue yet more tax cuts for the rich and trade wars with China. Neither one is especially good for the economy. It’s so simple.