US Election 2020: Bidenomics would give short-run growth boost
In this analysis, we dig further into the economic consequences of the Biden plan.
First, we find that Bidenomics, to some extent, helps bringing the US economy back on a stronger footing. The increased spending on education, healthcare, and housing etc. would especially benefit low- and middle-income earners. At the same time high-income earners and corporations would face higher taxes. But Biden would likely not succeed with all suggested reforms. Both the spending plan and the proposed tax revenues are expected to be much smaller than his proposal.
- Joe Biden’s economic plan is expected to lift GDP growth in the years to come
- … but the plan would also come with some long-run risks.
- From a global and regional perspective, the Biden policy would be more predictable.
Second, Biden’s planned reforms would also make US growth more sustainable in the long run. The suggested green elements come at a time when the climate crisis is a high priority for many. In addition, it might contribute to more innovation and investments in R&D, which could increase productivity after a weak period following the Great Financial Crisis. But the Biden plan is not all roses and even without the proposed spending measures the federal debt held by the public would be record high (almost 200% of GDP in 2050).
From a global and regional standpoint, Bidenomics would likely put the economies in a better position. Geopolitical risks would decrease, international cooperation with US allies may rise and the risk for an escalated trade war would be lower with Biden in the Oval Office.
With a few days left until the election, Biden is still in the lead in the polls and is seen as the winner by betting markets. However, the lead has narrowed lately. In this analysis we continue to assume a Biden victory and a Democratic Congress.
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