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The new US president's economic policy will differ from that of his predecessor in key respects. The core of "Bidenomics" will essentially be a debt-financed stimulation of aggregate demand, combined with an active industrial and distribution policy. The first priority is to combat the Corona pandemic: the vaccination campaign is to be accelerated and better coordinated so that the number of infections falls quickly and sustainably. After what is expected to be a weak first quarter, the US economy could then take off again from the spring onwards. Biden wants to spend an additional 1.9 trillion US dollars to stimulate the economy. Tax checks of $2,000 per household and increased unemployment benefits of $400 per week are classic elements of Keynesian fiscal policy: together with the $940 billion in spending already approved for the end of 2020, this fiscal stimulus will primarily boost private consumption. Since the demand generated in this way will meet scarce production capacities in many places, investment will also pick up significantly. Overall, the US economy is thus expected to grow by more than 5.5 percent in the current year - about one percentage point more than would have been expected without the economic stimulus package. Because inflation will remain moderate for the time being and monetary policy will remain expansionary, the stock markets have recently adjusted their earnings expectations upwards and reacted accordingly euphorically.
However, "Bidenomics" will not be limited to a huge spending program to stimulate the economy. Massive investments in infrastructure, research and development, renewable energies and alternative drive systems for private transport are intended to contribute to climate protection, but in principle they are also likely to create jobs. One may assume that the Biden administration will tend to give preference to the latter over the former in the event of a conflict of objectives. The structural change triggered or intensified in this way will - like any structural change - also produce losers.
Finally, "Bidenomics" contains a clear distribution policy component: lower and middle income groups in particular are to benefit from the upswing. This differs not only from Trump's corporate tax reform, but also from the policies of Democratic predecessors in office such as Obama. Raising the minimum wage to $15 an hour is intended to serve this goal, as are strengthening union rights and raising taxes. While a reversal of Trump's tax reform is unlikely to be enforceable, nor will it really achieve its goals, members of the upper income brackets in particular will have to reckon with selective tax increases. The motive here is not to reduce the government deficit, but to reduce the significant social imbalances that have characterized development in recent decades and contributed significantly to the country's internal division. For corporate profits, this part of "Bidenomics" could be burdensome, a fact that does not seem to have played much of a role in the markets so far.
If Biden is able to implement the main parts of his program, the "Bidenomics" program leads us to expect a dynamically growing economy, a continued very high budget deficit, and a noticeably weaker US dollar.