Been hearing the president make claims about the economy “he” created and that a Biden presidency would somehow destroy it? It’s time to examine those claims.
Before COVID-19 caused shutdowns across the country, Trump’s economy was already in recession. By September 2019, the number of new jobs created had dropped to an eight-year low. In raw numbers, Trump’s pre-COVID-19 three-year job creation numbers lagged behind Obama’s last three years. No matter what Republicans might claim, Obama created 1.6 million more jobs than Trump.
During the Obama/Biden administration, the GDP—which we use to measure overall economic growth—reached 5.5% in 2014, a high never matched by Trump. In fact, under Obama/Biden, the overall economy was better than under Trump.
And in terms of wages? Under Obama, real wage increases were 2.4%. Under Trump, it was only 2.1% before the pandemic hit. Both administrations did help reduce the poverty rate, but in 2019, a whooping 10.5% of Americans still lived in poverty, including 10.5 million children and almost one out of every five Black people.
Economic Growth Fares Better Under Democrats
Trump’s effect on the economy is not unique. Soaring debt and poor economic growth is a feature of Republican administrations going back more than 100 years. Since World War II, Democratic administrations have grown the economy on average 4.4% per year. GOP administrations, by contrast, have grown it only 2.5% annually.
Economists suggest that this superior economic performance reflects Democratic priorities. Democrats tend to invest more in education, infrastructure, social support, research and development of new technologies, all of which put money into the hands of individuals. These types of investments are long term and generally support projects that free markets shy away from because of risks and their need to generate profits.
Even so, taxpayer-funded investments actually fuel private sector profits. For example, investment in the government agency DARPA gave us the internet, which has generated trillions in private sector businesses and job growth. Yet under Trump, the U.S. has fallen out of the top 10 in global innovation, and 162 million Americans are without high-speed internet. This number includes over 7 million school-aged children who are trying to keep up with distance learning without the technology they need. As is the case with many things in this country, minority children make up a disproportionate part of this group.
Much of these losses has had to do with the gutting of tax revenue and the GOP’s failure to invest in America. Treasury Secretary Steven Mnuchin and Trump promised the 2018 tax cuts would “pay for [themselves] with growth and reduced deductions.” Yet, Fed Chair Jerome Powell testified to Congress that the tax windfalls in the GOP tax bill did not result in business investment or increased wages. Instead, the budget deficit has grown by more than half since Trump took office and corporations paid $135 billion less in taxes in 2018 than in 2017. In that same time period, the number of corporations that paid zero in federal tax doubled. (Amazon paid nothing in both 2017 and 2018!)
Biden’s Build Back Better Plan
President Joe Biden and his Build Back Better plan would address all these economic issues. First, Biden would raise the corporate tax rate to 28% from its current 21% (which is still a decrease from the tax rate before the cuts). When it comes to people, only folks making adjusted gross income of $400K to $700K would see a tax increase of 1% or less. People who earn more than $1 million would see a slightly larger increase. The plan also limits deductions high-income earners can take, making the tax code fairer to everyone. Biden’s proposed tax changes would increase America’s revenues between $3.3 trillion and $4 trillion over the next 10 years.
Where would that revenue go? During Biden’s term, the country would invest $300 billion in research and development for new technologies and clean energy initiatives. His plan invests in infrastructure, education, alternatives to college, and jobs training for people in dying industries like coal mining. Moreover, his plan includes spending $400 billion to buy U.S.-made goods and services, which increases manufacturing jobs, spurs competition, and grows the economy.
Business experts all agree that our economy would be better under Biden’s plan. Not only would it increase our country’s ability to invest in our future, the plan also benefits the overall economy because we would cut down on our federal debate while raising our GDP.
Biden’s economic plans would also shore up one of our most important economic safety nets: Social Security. The basic insurance program not only supports seniors with income for later in life, Social Security also provides income for younger people with disabilities and dependents whose parents or spouse have died. Currently, about 64 million people receive these earned benefits, having paid into the program throughout their working lives.
Social Security faces a $53 trillion gap in the next 75 years, however. The GOP has consistently advocated risky privatization, cutting the already minimal benefits, and raising the eligibility age. Biden’s plan seeks to shore up Social Security without reducing how much money people get. Currently, workers who earn up to $137K only contribute 6.2% of their income to Social Security. After that income limit, Americans contribute nothing. Under Biden, those with a $400K income would need to pay an extra 12.4% into Social Security. Not only would this keep Social Security solvent, it would also make it fair to all Americans, instead of forcing low-income workers to contribute a larger portion of their income than high-income workers.
The new monies flowing into Social Security coffers would allow the Biden administration to provide higher benefits to seniors and those who have earned lower incomes throughout their lives. Currently, low-income earners receive about $886 per month from the program. Under Biden, that amount would rise to $1,301. His administration would increase survivor benefits by 20%. And if you live longer, you get more money — a 1% annual increase during years 16 to 20 after the initial benefits kick in.
Americans Better Off With Biden
Under Biden, Americans would be better off. That’s not just my opinion. Economists Mark Zandi and Bernard Yaros of Moody’s Analytics have analyzed the two candidates’ plans. A Biden administration, aided by a Democratic Congress, would create 7.4 million more jobs than a second Trump administration. Goldman Sachs and Oxford Economics have concluded that even if Biden’s plans have to shrink a bit, the post-pandemic economy would recover more quickly. A recent study by Urban Institute showed that in the first year alone, Biden’s plan would lift 1.4 million Americans out of poverty.
Moody’s economists’ analysis has determined that a Democratic government would lead to a much stronger, more sustainable and resilient economy. If the Democrats sweep the elections, the “economy is expected to create 18.6 million jobs during Biden’s term as president, and the economy returns to full employment, with unemployment of just over 4%, by the second half of 2022.” And they have concluded that the average household income would increase by $4,800.
So under Biden’s plan, average earners make more. Social Security is shored up and pays more in benefits. GDP will increase, and jobs growth and unemployment will return to pre-pandemic levels. And the top 2% of earners and corporations will pay their fair share, reducing income inequality. Still undecided?
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