The effects on deficit – Trump vs Biden

The very similar budget deficits suggest that the addition to real final demand of both programs is similar. Both would add similar amounts of deficit stimulus. This deficit stimulus would add similar amounts of employment in each case. The idea shown elsewhere that the Biden program might provide more stimulus, and hence more jobs, is not consistent with a bipartisan examination of the programs.

A Biden-Sanders Program?

The more familiar we become with the Biden program, the more we can see the influence of Bernie Sanders. In this election, the Democratic primary selection process was cut short by the intervention of the pandemic. The result was that Biden was selected as candidate only after considerable negotiation within the Democratic National Committee, between the supporters of Biden and the supporters of Sanders. The result is that the Sanders supporters have appeared to gain support of an enormous part of their proposals within the Biden program.

The effect is to increase both the components of "Tax and Spend" within the Biden program. Even though the size of the deficits is similar in the Trump program and the Biden program, the Biden program increases taxes by much, much more and increases spending by much, much more. The taxes selected and the spending selected, strongly reflects the populist nature of the Sanders supporters. There are dramatic increases in spending in the Biden program on childcare and education, healthcare and long-term care, social security and retirement plus major increases in spending on green projects. These green projects are referred to within the Biden program as infrastructure.

Were such proposals to be advanced within a European social democratic structure, they would be financed by an increase in value added tax. This would make the spending economically neutral in terms of its effect on growth. However, within the populist program advanced by Sanders, these proposals are paid for by dramatic increases in taxes on business and investment. These taxes have the result of damaging long-term US growth. Increases in marginal tax rates on high income earners also damage potential private investment.

Childcare and Education

A summary of the proposals within the Trump program and the Biden program is shown in Table 1 above. This is contained within Figure 2 of the CRFB report. Under the Trump program, spending on childcare and education increases the deficit by $US0.15 trillion. Under the Biden program, spending on childcare and education increases the deficit by $US2.7 trillion.

Healthcare and Social Security

Under the Trump program, spending on healthcare and long-term care reduces the budget deficit by $US0.15 trillion. Under the Biden program, spending on healthcare and long-term care increases the budget deficit by $US2.05 trillion. Under the Trump program, there is little change to social security and retirement, meaning that there is no change to the budget deficit. Under the Biden program, spending on social security and retirement increases the budget deficit by $US1.15 trillion.

Infrastructure

Under the Trump infrastructure program, $US2.7 trillion is added to the budget deficit. The objectives are to win the race to 5G and to continue to lead the world in access to the cleanest drinking water and the cleanest air. Trump has also proposed to invest almost $US20 billion in broadband and internet access. The program allocates $US9 billion to a capital revolving fund, $US75 billion to expanding surface transportation spending and $US190 billion to support major infrastructure investment. Additional spending would support expanding 5G, water and clean air funding.

Under the Biden infrastructure program, $US4.45 trillion is added to the budget deficit. Biden intends to invest in green infrastructure and American innovation. Biden's more recent "Build Back Better" calls for 100% clean energy by 2035. The plan would spend $US2 trillion over four years. Biden also proposes investing $US300 billion over four years to promote research and development of technologies such as electric vehicle technology, artificial intelligence systems and next generation communication networks, as well as $US400 billion over four years on Federal procurement of products made in the United States by domestic workers.