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Oct. 1, 2020, 12:04 p.m. EDT

Why Biden is better for the economy than Trump

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By Nouriel Roubini

NEW YORK ( Project Syndicate )—Joe Biden has consistently held a  wide polling lead  over President Donald Trump ahead of November’s election.

But, despite Trump’s botched response to the COVID-19 pandemic—a failure that has left the economy far weaker than it otherwise would have been—he has maintained a  marginal edge  on the question of which candidate would be better for the U.S. economy.

Thanks to Trump, a country with just 4% of the world’s population now  accounts  for more than 20% of total COVID-19 deaths—an utterly shameful outcome, given America’s advanced (albeit expensive) health-care system.

Breaking news: Coronavirus aid talks entering final stages as Pelosi, Mnuchin meet in Washington

The presumption that Republicans are better than Democrats at economic stewardship is a longstanding myth that must be debunked. In our 1997 book, “ Political Cycles and the Macroeconomy , “the late (and great) Alberto Alesina and I showed that Democratic administrations tend to preside over faster growth, lower unemployment, and stronger stock markets than Republican presidents do.

In fact, U.S. recessions almost always occur under Republican administrations—a pattern that has persisted since our book appeared. The recessions of 1970, 1980-82, 1990, 2001, 2008-09, and, now, 2020 all occurred when a Republican was in the White House (with the exception of the double-dip recession of 1980-82, which started under Jimmy Carter but continued under Ronald Reagan). Likewise, the Great Recession of 2008-09 was triggered by the 2007-08 financial crisis, which also occurred on the GOP’s watch.

This tendency is not random: loose regulatory policies lead to financial crises and recessions. And, compounding matters, Republicans consistently pursue reckless fiscal policies, spending as much as Democrats do, but refusing to raise taxes to make up for the resulting budget shortfalls.

Owing to such mismanagement under the George W. Bush presidency, President Barack Obama and Vice President Biden inherited the worst recession since the Great Depression. In early 2009, the unemployment rate surpassed 10%, growth was in free fall, the budget deficit had already exceeded $1.2 trillion, and the stock market /zigman2/quotes/210598065/realtime DJIA -3.43% was down almost 60%. Yet, by the end of Obama’s second term in early 2017, all of those indicators had massively improved.

In fact, even before the COVID-19 recession, employment and GDP growth, as well as the stock market’s performance, were  better under Obama  than under Trump. Just as Trump  inherited  millions from his father, only to  squander  it on business failures, so he inherited a strong economy from his predecessor, only to wreck it within a single term.

The rally in equity prices /zigman2/quotes/210599714/realtime SPX -3.53% this past August coincided with a hardening of Biden’s polling lead, suggesting that markets are not nervous about a Biden presidency, or about the prospects of a Democratic sweep of Congress.

The reason is simple: a Biden administration would be unlikely to pursue radical economic policies. Biden may be surrounded by progressive advisers, but they are all fully within the political mainstream. Moreover, his vice presidential pick, Sen. Kamala Harris of California, is a proven moderate, and most of the Democratic senators who would be seated in a new Congress are more centrist than the left wing of their party.

Opinion: A Nobel laureate makes the economic case for Joe Biden

Yes, a Biden administration might raise marginal tax rates on corporations and the top 1% of households, which Trump and congressional Republicans cut merely to give wealthy donors and corporations a $1.5 trillion handout.

But a higher tax rate would result in only a modest hit to corporate profits. And any costs to the economy would be more than offset by closing the loopholes that allow for tax avoidance and shifting profits and production abroad, and with Biden’s proposed “ Made in America ” policies to bring more jobs, profits, and production home.

Opinion: The K-shaped economic recovery: For half of America, the economy is still terrible

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,519.95
-943.24 -3.43%
Volume: 499.63M
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/zigman2/quotes/210599714/realtime
US : S&P US
3,271.03
-119.65 -3.53%
Volume: 3.15B
Oct. 28, 2020 5:11p
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