Breakingviews - Hadas: U.S. election offers economic non-sense

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BALTIMORE (Reuters Breakingviews) - Pope Francis must be watching a lot of American cable news these days. “Political life no longer has to do with healthy debates about long-term plans to improve people’s lives and to advance the common good, but only with slick marketing techniques primarily aimed at discrediting others,” the pontiff recently wrote in his “Fratelli tutti” encyclical. The same applies aptly to the economic plans of the two U.S. presidential candidates. The incumbent Republican Donald Trump and Joe Biden, his Democratic Party challenger, are mostly offering different varieties of similar nonsense.

Trump mostly offers what Francis calls “hyperbole, extremism and polarization.” His campaign website largely boasts about the first term’s economic policies, promising more of the same. The list includes tax cuts that were not aimed at decreasing income or wealth inequality, restrictions on immigration, anti-China trade rules, and environmental deregulation.

Supporters can find justifications for Trump’s enthusiasm, but the economic evidence doesn’t support any of these ideas. More equal incomes generally help create jobs and strengthen growth. Migration, both skilled and so-called unskilled, has long been central to American economic success. Free trade almost always benefits rich countries at least as much as poor ones. And limiting pollution brings real gains that do not appear in reported gross domestic product numbers.

Against this, Biden campaign literature looks more sensible. While the Trump campaign website has the look and feel of an advertisement for an emotionally satisfying consumer product, the inner pages of Biden’s site seem to have been written by a not-very-imaginative political think tank.

There are technocratic platitudes: “Community health solutions can lead to better health outcomes, allow people to live with more independence, and ease caregiving challenges through a focus on prevention and care coordination.” And there are the mind-numbing details. New community health workers will be paid for “by providing direct grant funding, as well as adding community health worker services as an optional benefit for states under Medicaid.”

What’s missing is any recognition that new government programs generally require the requisitioning of existing resources. More money for community health services or grants for parents of young children means less money for other good or politically friendly causes. Biden presumably knows that, but fears losing votes by admitting that increased government help for poor and middle-class citizens inevitably requires higher taxes on people who don’t think they’re that rich.

Presidential campaigns may be the wrong venue for such hard truths. Still, the vituperative 2020 campaign offerings seem particularly distant from economic reality. Consider two especially relevant divergences.

First, the post-pandemic economy. The medical effectiveness of the sharp restrictions on activity enacted to slow the spread of Covid-19 is disputed, but there is little debate about the great economic and educational damage they’ve already caused in the United States, with no end in sight.

The government’s work will not be done when the restrictions are lifted, and the pandemic of fear is quelled. A full and fast economic recovery will require substantial further support of consumer spending. Reductions of the burdens on business and consumer debts, along with subsidies to employers to encourage hiring and rehiring would also help.

Trump took a significant step in the wrong direction last week, announcing the suspension of negotiations with Congress on the next phase of government support. He later backtracked, but the delay and uncertainty increase the damage. 

Biden also promises various sorts of aid, but he is still far from the whatever-it-takes fiscal approach implicitly suggested last week by Jerome Powell, the chairman of the Federal Reserve. Biden is also ignoring the overwhelming evidence from Europe and parts of the United States that schools can reopen safely with few additional precautions.

Then there’s industrial policy. Both candidates claim to have a vision for America’s economic future, but neither seems to have done much of the necessary joined-up thinking. The problem is not an excess of free-market ideology. Trump, a largely mediocre businessman, seems happy with crony capitalism and such traditional tools of government control as tariffs and quotas. Biden, true to his big-state ideological roots, is theoretically committed to government leadership.

But Trump likes gestures more than coherent policies and seems not to understand that increased productivity destroys far more manufacturing jobs than unfair trade. Biden just seems to have the wrong intellectual reflexes. That’s not surprising, as he has spent much of his almost-78 years speaking up for unions, which have little presence in high technology or non-governmental service industries.

While the economic arguments between Trump and Biden have largely been backward-looking as well as bitter, their agreement on the economic irrelevance of fiscal deficits is a hopeful sign. There is some lip service paid to the goodness of balanced budgets on both sides, but in practice Democrats and Republicans accept the basic tenet of Modern Monetary Theory – that government spending should be guided by economic reality rather than by the fear of red ink. Now if only Trump and Biden could stop fighting and think harder about what reality demands.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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