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03/11/20203 mins

Beyond the US election: spending, bigly

The US presidential candidates agree on little. From the economy to healthcare, Vice-President Joe Biden and President Donald Trump stand worlds apart. The message that this election represents a dichotomous choice is reinforced by both campaigns. If you take the accusations levelled by each party against their rival at face value, the future of America looks like a fascist dictatorship or a communist-type dystopia. But campaigning isn’t governing, so here we explore how things might proceed when the dust has settled.

America’s two futures

Notable differences between the two candidates are their approaches to international relations, tax policy and tackling Covid-19.

In the international arena, America’s relationship both with allies and adversaries has undergone a period of change. President Trump points to ‘fairer’ trade deals as a major accomplishment for his administration; Biden has criticised the president’s “America First” approach and instead wishes to repair relations with allies and international organisations. Biden has also suggested that multinational efforts are better than unilateral trade sanctions at fixing the relationship between the US and China.

On tax, the candidates are split on traditional party lines: the Republicans are hinting at lower taxes for middle-income earners and generally sticking to the existing approach to corporate taxation. The Democrats, on the other hand, are supportive of increasing taxes on America’s wealthiest citizens as well as business.

As things stand, the US’s high number of Covid-linked fatalities place the victor in an unenviable position. President Trump has promised to deliver a vaccine by the year end, suggesting that his willingness to fast-track its approval will benefit the American public. Joe Biden, in contrast, intends to defeat Covid-19 through methods such as making the wearing of masks mandatory and potentially further lockdowns; regardless of which policy is right, the polls suggest that Biden is more trusted to deal with the issue.

Delivering on promises

In a previous article, we discussed the effects of inflation in an America where the spending taps are never turned off. Neither candidate has offered even a cursory nod toward balancing the government’s books. And that’s not surprising; even in a crisis, spending promises remain vote winners. With Trump accelerating the rate of deficit-accretion, started during the Obama administration, Covid-19 offers the next president the excuse to continue with this new norm. Thus, despite the differing visions of the candidates, public spending will undoubtedly rise regardless of the election outcome.

The Scottish Investment Trust PLC is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority.

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