Fiscal impact of Biden and Trump plans: compare and contrast

The following article compares and contrasts the fiscal impact of Biden and Trump plans. The article is extensive. The introduction is included below:

Biden And Trump Promises: Compare And Contrast by Hugo Erken, Philip Marey, Hidde Sevinga and Michiel van der Veen of Rabobank, ZeroHedge, October 25, 2020:

  • While both Trump and Biden want to boost economic growth and reduce unemployment, their approaches are radically different.
  • Trump wants to grow the economy by reducing taxes and regulation, whereas Biden seeks to achieve this through increased government spending and investment
  • In this report, we try to assess the impact of their policy plans on a range of macroeconomic variables, such as GDP, real income, public debt and trade
  • A second term for President Trump would leave our baseline scenario for US GDP growth and the public debt largely unchanged. The upward effect on GDP growth from additional Trump tax cuts would be offset by the cuts in government spending aimed at stabilizing the public debt to GDP ratio
  • The tax relief in the Trump administration’s plans results in a rapid pickup of real personal disposable income in the aftermath of the corona crisis from $43,350 per capita by the end of this year to roughly $47,000 in 2025, which is $1,000 more than in our baseline
  • Unemployment and trade under Trump would roughly follow the same trajectory as in our baseline
  • The Biden plan would boost GDP growth, but also the trajectory of public debt to GDP. In the long run, we expect the US economy to be larger by 3.8% to 4.6% due to the Biden plan tapping into the endogenous growth potential of the economy. However, we expect public debt to arrive at somewhere between 164% and 170% of GDP, which is much higher than the 147% in our baseline scenario
  • As Biden imposes higher taxes, by 2025 we project real disposable personal income to barely touch $46,000 per capita, which is even slightly below our baseline. However, as the impact of tax policies start to peter out, we expect a rapid pickup in income after 2025, which is directly related to productivity-enhancing policies which prop up economic growth. Ultimately, we expect real income to be 2.2% to 3.3% higher
  • US trade is expected to rise significantly under Biden. As US export do not rise in tandem, this will also result in a widening trade deficit in the long run
  • In the short term, Biden’s policy packages push unemployment below levels in our baseline, as positive employment effects of additional government spending outweighs the negative impact of a higher minimum wage. However, mid- decade unemployment is expected to rise above the baseline, partly related to higher corporate taxes and a pickup in labor-saving technological change