In a few days, Americans will choose a president. Opinion polling suggests that voters favor former Vice President Joe Biden when it comes to social policy, foreign policy, the environment, and managing the pandemic, not to mention personal character.
But until recently, some polls indicated that on the economy, voters favored President Donald Trump.
The general impression that the US economy does better under Republicans than Democrats is long-standing. But the facts do not support it.
In the 16 complete presidential terms since World War II, from Harry Truman through Barack Obama, annual GDP growth averaged 4.3% under Democratic presidents, versus 2.5% under Republicans.
Trump’s presidency has pulled down the Republican score further. In fact, average annual growth during his term to date has actually been negative.
The necessary qualifier in such comparisons is that the president is only one of many influences on the economy. Luck also plays a big role.
For starters, Biden would implement a federal plan to combat the coronavirus, informed by scientists’ and health professionals’ expertise.
One might choose to exclude 2020 from Trump’s record, for example, on the grounds that the coronavirus was just bad luck.
But even the pre-pandemic increases in GDP, employment, and the stock market under Trump merely continued trends that he inherited from Obama.
Moreover, one cannot absolve Trump of responsibility for mismanaging the pandemic. His only “plan” remains to predict that the virus will disappear within a few weeks.
He has aggressively undermined the measures urged by experts, such as mask-wearing and mass testing, which would have better protected both public health and the economy.
In any case, the difference in average economic performance between Democratic and Republican administrations is statistically significant – that is, not attributable to pure chance.
A simple calculation can make the point. The last five recessions, including the current one, all started while a Republican was in the White House.
If the chances of a recession beginning under a Democratic or Republican president were equal, then the odds of that happening would be one in 32, or just over 3% – the same as the chance of getting the same result on five consecutive coin tosses. That’s not very likely.
The difference in past performance seems too strong to be true. Ideally, we would be able confidently to identify and quantify policies that Democratic presidents have adopted that could directly explain the disparity.
But that is a tall order. So, let us consider instead the policies that a Biden administration can be expected to implement, at least if the election produces a Senate he can work with.
Trump has been trying to convince voters that Biden would introduce radical leftist policies if elected. Some other candidates for the Democratic nomination did support policies that if interpreted literally were well to the left of most of the American electorate, and even to the left of the median Democratic voter.
These included Senator Bernie Sanders’ “Medicare for All” proposal, which would have abolished private health insurance, and the federal job guarantee in the Green New Deal legislation proposed by congressional Democrats.
Although Biden has explicitly rejected these policies, and won the Democratic nomination as a moderate, his economic plan differs hugely from Trump’s approach.
The recent Republican National Convention did not produce a platform, so we must look at the president’s first-term actions to assess what he might do if re-elected.
Three stand out: his attempts to dismantle the 2010 Affordable Care Act (Obamacare), the December 2017 tax cut that mostly added to corporate profits, and a trade war that has left almost everyone worse off.
Although Trump promises to help American workers, these policies have the opposite effect, as at least 850 economists agree.
Biden would pursue environmental goals aggressively. Although his strategy includes continued rapid expansion of renewable energy, we should not pretend that solar and wind power can supply 100% of US energy needs in the near future.
By contrast, Biden’s policy proposals address goals that most Americans share: restoring economic prosperity, doing more to help households left behind even before the pandemic, and restoring progress on environmental protection.
Moreover, he would pursue these goals in ways that are practical, rather than merely sounding good on a bumper sticker.
For starters, Biden would implement a federal plan to combat the coronavirus, informed by scientists’ and health professionals’ expertise.
This includes making free testing widely available, eliminating cost barriers to COVID-19 prevention and treatment, developing a safe, effective, and reliable vaccine, and strengthening America’s public-health capacity to manage future crises.
Biden would renew big spending programs that Congress has allowed to lapse, such as emergency paid leave for those who need to stay home from their jobs for health reasons.
He would continue strong macroeconomic stimulus until income and employment returned to pre-pandemic levels.
Large-scale investments in infrastructure, research and development, and education that boost productivity growth over time also are central to the Biden plan.
Furthermore, he would build on Obamacare’s achievements and sharply reduce the number of Americans who lack health insurance, rather than reversing these advances, as the Republicans have worked to do.
Biden proposes to finance such spending by progressive taxation, including by rolling back the 2017 corporate tax cut and raising the cap on wages that are subject to the payroll tax which helps fund Social Security.
Finally, a Biden administration would seek to restore America’s previous international role by keeping the US in the World Health Organization, rejoining the Paris climate agreement, abiding by other international agreements, and treating our allies better than our adversaries.
He has promised not to increase taxes on incomes below $400,000. Moody’s Analytics estimates that the gains from Biden’s proposed new spending would outweigh the dampening effect of his tax increases; by 2024, real GDP would be 4.5% higher than under current policies.
Biden would pursue environmental goals aggressively. Although his strategy includes continued rapid expansion of renewable energy, we should not pretend that solar and wind power can supply 100% of US energy needs in the near future.
Biden doesn’t think that fracking should be banned in those parts of the country that want the jobs it brings. But methane leaks and other negative environmental side effects can and should be tightly curbed by regulation; if not, fracking should not proceed.
Finally, a Biden administration would seek to restore America’s previous international role by keeping the US in the World Health Organization, rejoining the Paris climate agreement, abiding by other international agreements, and treating our allies better than our adversaries.
Post-war Democratic presidents have been significantly better for the US economy than Republicans have. There is every reason to believe that trend will continue if Biden wins on November 3.
There have been few elections with such a discernible difference in the likely quality of the two candidates’ economic policies. In this case, Biden’s are better.
(Jeffrey Frankel is Professor of Capital Formation and Growth at Harvard University)
Copyright: Project Syndicate, 2020.
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