HS analysis Even business rejoices in Biden’s era: Admittedly, there is an assumption behind the president’s failure

In the market, Biden is expected to successfully revive the economy. At the same time, many hope that the new president will fail in the tax increases that would be used to pay the stimulus costs, writes Tuomas Niskakangas, HS’s financial journalist.

The United States resigning president Donald Trump was one of the most business-friendly presidents in history.

About the new president Joe Biden there is no way to expect the same. Rather, Biden’s plans for business have included tightening taxation and regulation.

Yet Trump’s transition to Biden has been welcomed in companies and markets calmly – almost with joy.

Why?

1. Biden succeeds in resuscitation

Biden brings with it many threats to business, but one great opportunity seems to have overshadowed them all.

In addition to the $ 900 billion stimulus package decided at the end of last year, Biden is planning a new $ 1,900 billion package.

The Business Research Institute has calculated that the new package would raise the U.S. corona revival to date to more than a quarter of the country’s gross domestic product.

Money would flow for many purposes, which are also considered to benefit business. Ordinary Americans would be given another $ 1,400 in cash gifts under current plans. These would come in the spring and in addition to the checks sent out towards the end of the year.

Biden’s plans would also generously distribute support to the unemployed, federal local governments, the vaccine program, and public investment.

The stimulus package put together because of the pandemic is believed to allow for many expenditures that would not normally receive funding from Congress. Such is, for example, the climate investment that Democrats want, for example to promote electric cars. They benefit both the electrical and construction industries.

Major investment banks Moody’s and Goldman Sachs have estimated that Biden’s victory, combined with the Democratic-majority Congress, will accelerate U.S. economic growth compared to a baseline path that does not include changes in economic policy. Even if Biden were to go through tax cuts, their detrimental effect on economic growth would be less than the stimulus effect of the stimulus.

Etla believes that the recovery of the United States from the interest rate crisis and the more general upswing in the global economy will also be felt in a significant way in the Finnish economy.

2. Biden fails in the rest

Second the reason for the business calm is that companies do not believe in Biden’s widespread success in those projects that would threaten business interests. Many of Biden’s toughest goals, such as tax increases, will run into fierce opposition from Republicans in Congress.

Biden’s Democrats are, of course, on the neck in both chambers of Congress. On the Senate side, the pounds are exactly 50-50, but the vice president Kamala Harrisin the vote will decide in a tie a vote for the Democrats. This advantage is shaky and not enough for the effortless implementation of major reforms. That would require a majority of 60 senators, for which Biden needs a significant number of Republican supporters.

The Wall Street Journal estimates that Biden will be allowed to go through some kind of tax reform, but the form of the reform will remain weaker than what he outlined in his campaign. For example, in the Trump period, the corporate tax rate from 35% to 21% may be raised to 23 or 25%, barely 28, as Biden has planned.

It is also unclear whether the tax cuts for the highest-income American households will go through Congress if Biden goes to seriously promote them.

Same uncertainty concerns the incense of large technology companies. Share prices for Apple, Alphabet, Facebook and Amazon have remained high.

Both Democrats and Republicans have seen the need to put restrictions on the power of the techno giants, but their starting points for more regulation are completely different. Republicans believe technology companies censor conservative opinions, while Democrats believe companies do too little to prevent the spread of false information.

Congress is expected to drag techno-giant leaders onto Capitol Hill for hearings, but extensive legislation that would threaten corporate growth is not considered likely.

Biden is not expected to cause significant harm to companies either in terms of climate policy. Biden has promised to rejoin the United States back to the Paris Climate Agreement and is committed to carbon neutrality by 2050. Investments that benefit businesses are unlikely to be counterbalanced by revolutionary regulation or taxation.

For example, tightening fuel taxation in the United States is politically very difficult. According to The Wall Street Journal, fuel taxation in the United States was last tightened 30 years ago.

3. Anything is better than Trump

Third the reason for the silence of the business is Trump.

Biden brings stability to the economy after the chaotic period of its predecessor, which is valued by the business community. For example, in trade policy and relations with China, Biden is expected to bring reason and restraint, even though in the big picture he is continuing on the protectionist path indicated by Trump.

In his first months, Biden benefits from the fact that Trump’s season left a painful wound and stigma in U.S. history. A lot of leaders now just want to get a neat change of administration.

When the change of power is over and Biden’s honeymoon ends, criticism begins to intensify.

.

Related Posts

Premium Content