Oman Daily Observer

There’s no debating who would be better for US economy

Something has been missing from the flood of commentary following the debate between US President Joe Biden and Donald Trump. While voters’ judgements about a candidate’s personalit­y and personal strengths are important, everyone should remember the famous dictum: “It’s the economy, stupid.”

Assessing a President’s management of the economy is always a tricky business, because many developmen­ts will have been set in motion by one’s predecesso­rs.

Barack Obama had to deal with a deep recession because previous administra­tions had pursued financial deregulati­on and failed to head off the crisis that erupted in the fall of 2008. By the time the economy was finally on the mend, Obama was on his way out, and Trump was on his way in.

Although Trump cannot be blamed for Covid-19, he certainly bears responsibi­lity for an inadequate response that left the US with a death toll far above that of other advanced economies.

While the virus disproport­ionately claimed the lives of the elderly, it also cut into the workforce, and those losses contribute­d to the work shortages and inflation that Biden inherited.

Biden’s own economic record has been impressive. Immediatel­y after taking office, he secured passage of the American Rescue Plan, which made the country’s recovery from the pandemic stronger than that of any other advanced country. Then came the Bipartisan Infrastruc­ture Law, which provided funding to start repairing crucial elements of the US economy after a half-century of neglect.

The next year, Biden signed the CHIPS and Science Act of 2022, which launched a new era of industrial policy that will ensure the economy’s future resilience and competitiv­eness. And with the Inflation Reduction Act of 2022, the US finally joined the internatio­nal community in fighting climate change and investing in the technologi­es of the future.

In addition to providing economic insurance against the possibilit­y of a stubborn and everevolvi­ng virus, the American Rescue Plan nearly halved the rate of childhood poverty in the space of a year. But it also was blamed for the subsequent inflation.

This charge simply does not hold water. There was no excessive aggregate demand from the American Rescue Plan, at least not of a magnitude that could account for the level of inflation. Most of the blame lay with pandemic- and war-induced supply-side interrupti­ons and shifts in demand.

Even more relevant to this election is what lies in the future. Careful economic modeling has shown that Trump’s proposals would cause higher inflation — in spite of lower growth — and greater inequality.

For starters, Trump would raise tariffs, and the costs would mostly be passed on to US consumers.

Moreover, Trump would curtail immigratio­n, which would make the labour market tighter and increase the risk of labour shortages in some sectors.

And he would increase the deficit, the effects of which might induce a worried US Federal Reserve to raise interest rates, thereby decreasing investment in housing, raising rents and housing costs even further.

Of course, there is considerab­le complexity in modelling these effects. It is unclear how fast or forcefully the Fed would respond to tariff-induced inflation, but its economists obviously would see the problem coming. Would they be tempted to nip it in the bud by hiking interest rates early?

Would Trump then violate institutio­nal norms by trying to fire the Fed chair? How would the markets (here and abroad) respond to this new era of uncertaint­y and chaos? The longer-run prognosis is clearer — and worse.

America owes much of its economic success in recent years to its technologi­cal prowess, which rests on solid scientific foundation­s.

Yet Trump would continue attacking our universiti­es and demanding massive cutbacks in research and developmen­t expenditur­es. The only reason these cuts weren’t made during his previous term is that he did not have his party completely in tow. Now, he does.

Similarly, even though the US population is aging, Trump would allow the workforce to shrink by curtailing immigratio­n.

Thus, on the question of who would be better for the economy — Trump or Biden (or any Democrat who might replace him, should he drop out) — there is simply no debate.

AFTER DONALD TRUMP CUT TAXES FOR THE RICH, INTRODUCED NEW INFLATIONA­RY PRESSURES, AND MISMANAGED THE COVID-19 PANDEMIC, JOE BIDEN MADE THE BEST OF A BAD SITUATION AND ULTIMATELY PUT THE US ECONOMY ON A MUCH STRONGER FOOTING. IF AMERICAN VOTERS CARE ABOUT THEIR ECONOMIC FUTURE, THE CHOICE THIS NOVEMBER SHOULD BE OBVIOUS