by Ray Keating
The Keating Files – December 13, 2020
Barack Obama was dealt a bad hand on the economy – to say the least – when he was elected in 2008. Unfortunately, his policy agenda proceeded to make matters worse, deepening the Great Recession and undermining the subsequent recovery. Obama’s vice president and now-President-elect Joe Biden didn’t learn from Obama’s errors, and apparently is ready to repeat the mistakes of recent history.
Similar to Obama, Biden has been dealt an extremely bad hand on the economy, i.e., the pandemic, and the resulting troubles in terms of illnesses, deaths and economic woes. But again, looking ahead, Biden’s policy agenda, if implemented, would make matters worse.
No matter what one’s view of the government’s COVID-19-related shutdowns and aid efforts might be, the fact is that on the other side of this pandemic, the U.S. faces enormous economic challenges. Those include restarting economic growth, and dealing with the costs of a vast expansion in government spending and debt.
The fact is that the consequences of this explosion in government can only be dealt with constructively in an environment of strong economic growth. On the policy front, that means a tax, regulatory and trade agenda that strengthens the foundation for economic growth, at the same time as government spending is being reined in and capped.
President Obama’s agenda of more government spending, higher taxes, and increased regulation wound up increasing the costs of and creating disincentives for entrepreneurship and private investment. In turn, the subsequent economy underperformed, with economic growth running at about half of what it should be during period periods of recovery and expansion.
And now we see President-elect Biden likewise presenting an agenda of expanded government, higher taxes, and increased taxes. For example, Biden’s tax plan features higher individual income, payroll and capital gains tax rates on upper-income earners, that is, on entrepreneurs and investors, and a higher corporate income tax rate.
And then there’s Biden’s call for increased regulation – in particular, more government mandates in labor markets – and a spending agenda chock full of new programs and spending plans.
Biden either fails to understand basic economics, or chooses politics over economics (or both). Economic common sense makes clear that raising costs, reducing potential returns, and diminishing incentives for starting up, expanding and investing in businesses will undermine economic, income and employment growth.
Reducing resources and incentives for entrepreneurship and investing in new businesses always rates as bad policy. But given the sweeping destruction of small businesses during this pandemic, and how vital small businesses are to growth, innovation and job creation, it’s even more dangerous, troubling and absurd right now.
There’s also a good chance that a Biden administration would continue with at least parts of the worst aspect of the Trump economic agenda, i.e., trade protectionism. After all, it’s important to keep in mind that prior to Trump, the Democrats ranked as the anti-free-trade, pro-protectionism party. The only real difference is that the Democrats tend to dress up protectionism in prettier language than Trump (not exactly hard to do). And the earliest, post-election signals are not good, as President-elect Biden has hesitated on talking about rolling back Trump’s destructive anti-trade measures, and even noted that he might keep the tariffs around that American businesses and consumers are paying on Chinese imports.
Keep in mind that the 2008 presidential campaign of Barack Obama and Joe Biden was strikingly similar in tone on trade to the Trump agenda. Once in office, Obama stepped back from his protectionist rhetoric, but Trump moved aggressively in a protectionist direction. The Trump trade agenda has taken a toll on U.S. economic growth, and if Biden does not turn the U.S. in a free trade direction, then trade policy will continue to serve as another drag on economic recovery.
The economic road ahead promises to be rough. It will be made worse or better by the policies implemented. The U.S. needs a pro-growth agenda of tax and regulatory relief, free trade, and spending reduction and then restraint. However, President-elect Biden is focused on an anti-growth agenda of increased tax and regulatory burdens, more government spending, and at best, a foggy future on trade.
Don’t be surprised if the post-pandemic economic recovery badly underperforms under Biden, just as was the case under Obama.
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Recent pieces by Ray Keating…
“Rebuilding Conservatism #2: Free Trade Rocks and Protectionism Sucks”
“Rebuilding Conservatism #1: What is Conservatism?”
“Bing Crosby – Christmas Crooner, Top Entertainer, Top Entrepreneur”
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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur. His new book Vatican Shadows: A Pastor Stephen Grant Novel is the 13th thriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?
You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York from Amazon or signed books at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know.
One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club. Check it all out at https://www.patreon.com/pastorstephengrantfellowship
Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast and the Free Enterprise in Three Minutes Podcast
Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.
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