This upcoming presidential election could be one of the most pivotal of the last 50 years. The country is reeling economically, struggling through a public health crisis, and addressing the ills of systemic racism. All of those topics will shape the presidential election, but perhaps none more so than the economy.
Currently, 79 percent of voters indicate that the economy is “very important” to them, according to Pew Research. With that in mind, Moody’s Analytics conducted a deep dive into the macroeconomic impact of a Joe Biden presidency versus a Donald Trump second term, analyzing the impact of their tax plans, relief programs, and government spending proposals.
If the economy is important to you in this election, here’s what you should know about what the experts found.
Moody’s Best Case Scenario in Biden vs Trump
Moody’s Analytics – which falls under the same corporate umbrella as the credit rating service, Moody’s – analyzed a number of scenarios for the 2020 election and how they would impact the economy by 2024. Overall, the report found that the best outcome for the economy would be Biden winning the White House and Democrats taking control of the Senate.
This would be a major flip since Republicans currently hold both the presidency and a Senate majority. Moody’s placed the likelihood of this outcome at 20 percent but indicated it would be the most beneficial economically. With the full support of Congress, Biden would be able to enact a robust economic relief plan without major opposition, including massive government spending on housing, healthcare, education, and more. According to the forecast, a Democratic sweep would lead to near- and long-term economic growth, as well as a return to full employment by 2022. Overall, the forecast projects 18.6 million jobs created in this four-year term.
Biden does plan to raise taxes on some individuals and corporations, but the “benefits to long-term growth will more than offset the economic costs from the higher marginal corporate and personal tax rates under his plan,” according to Moody’s. Real GDP would be projected to rise 4.2 percent a year through 2024, and real disposable income would increase by half a percent annually.
There are some economic downsides to a Biden presidency, though. Biden’s economic policies would cost about $2.5 trillion to wholly enact, a significant sum for a nation already $26 trillion in debt. However, Moody’s anticipates that the economic growth under Biden would offset this deficit spending.
The flip scenario, a GOP sweep, would be the worst outcome for the economy. Moody’s projects that in a second Trump term with a Republican Congress, only 11.8 million jobs would be created and disposable income would actually decrease over the next four years. Trump’s economic plan with Congressional backing would slash government spending while reinforcing tax cuts on wealthy Americans and businesses. Coupled with the president’s aggressive stances on foreign trade and immigration, Moody’s overall projects a weak economy in a GOP dominated world. However, the agency gives this just a 5 percent chance of happening.
The other scenarios involve neither party controlling Congress and the White House simultaneously. The most likely outcome, according to Moody’s, is actually a Biden presidency with a Republican Senate and Democratic House of Representatives (40 percent chance). The next most likely outcome is a Trump presidency with Democrats controlling both chambers of Congress, at 35 percent.
In both forecasts, the president’s economic vision is hamstrung by the opposition party. As a result, neither a Trump nor Biden victory would have a significant impact on the economy without full congressional support.
“We expect only modest differences in enacted policy and the economic outlook with a split Congress, regardless of who is president, but the differences seem likely to be meaningful if Trump or Biden win the presidency with Congress under their party’s control,” the report states.
The Bottom Line
Although this report was designed to compare the economic plans of President Donald Trump and former Vice President Joe Biden, my greatest takeaway was what it said about Congress. While both candidates have broad economic visions, the nation goes as Congress goes. The only way Biden or Trump is effective is if the Senate sides with their party. Conversely, either man would be seriously handcuffed if elected without Congress.
Overall, Moody’s predicts GDP to rise and unemployment to decline regardless of who sits in the Oval Office. You can check out the full results of the study here, and it includes appendices with analyses of Trump and Biden’s financial plans!