What will the US presidential election mean for the economy?
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What will the U. S. Presidential election mean for the economy? I'm alternative, and this is golden sex exchanges. Each month, I speak with investors, policymakers and academics about the most pressing market moving issues for a top of my report from global sex research.

This month, I spoke with top economists from each party to find out how the upcoming election could impact economic policy. Jared burstein is the current chairman of the council of economic advisers under president by, and Kevin has had served as the chairman of the council economic advisers under present trump. I spoke to each about a range of economic policies that are on the table that could shape the years ahead.

As you might guess, a lot of them use different pretty starkly. But there are also some interesting points of common ground. I started off by asking how they characterize the economic landscape that the next U.

S. Present will inherit. Here's what current cea chair jared bernstein said.

Well, if you think about the macro economy, i'd say, uh, they're likely to inherit a sod expansion where inflation has come down from its peak, close to target without sacrificing much at all. On the economy's growth side, unemployment come up a bit, but IT remains low.

Th Epace o f j ob g ains j ust o ver t he p ast t hree m onths, one hundred and eighty six thousand, that's at the north end of the break even level, the most labour convenience subscribe to. And very importantly, from the perspective of by harassing administration, we have rising real wage of the incomes, and we had those ongoing for a while now. However, we have unfinished business when IT comes to the housing market, the child care market.

Clearly, extreme weather events are fundamental issue that we're dealing with, that the next administration will help deal with trade. Geopolitical chAllenges are ongoing as well. So solid macroeconomic background with a set of risks that are well known.

I asked the same question of former C E. A. chair.

Kevin has a going into the middle of summer, there were clearly signals in the labor market that we are entering recession, say, around August. And that's why when the fan cut illustrates thirty basis points IT made sense to be because the sam rule and other things we're kicking off that we are in a recession, but then everything just turned on a dime.

And in fact, if you look at the improvement and unemployment since then, since the peak has been like one of the sharper improvements in unemployment that we've seen in the history job market data. So it's a cut of the strange time IT looks like the latest, latest report was pretty troubling for a federal serve that just cut rates. And the weakness we saw, something seems to have evaporated. And I think that there's an open question whether the next administration and her an economy that's got momentum or the economy that the sum rule was cycling was added into resection, the suburbs. So I say it's kind of a fuddling economy, right?

I then asked each to share their views on a range of economic policy proposals. We started with the big one terrorist. I first turn to Kevin for his thoughts.

I think that the exceptional tarifa china is a very important policy. Developed economies have been shocked by the massive expansion of chinese corporate. And because basically the the amount of theft of us, electable property and and spying is going out to the us is really disturbing in its way outside of the bounds of things that any other country, other does. So I think that a china should be kicked out of the wo probably. I think however, a trade policy a country wants to have towards china, I think that it's deserved.

is IT mostly about that theft or other other unfair trade practices.

I think that I P theft and its production of stuff that's geopolitically, strategically important. As an example, going back to the steel turbo during the trip of the straw, it's widely accept to, in fact, the allies what world or two, because of U. S.

Productive capacity. And when you asked yourself what was that we were producing that that helps us with world war two, that IT was mostly steel. Everything has stimulated, right? That takes the airport. Ys and the chinese have invested in a massive over capacity of steel, which really puts them visibly on a war footing. And they're duck of steel everywhere, tried to close out, steal a district where else but we were, allow our steel, a district, to just disappear while the child have enough steel capacity to launch out at war that I think will have made IT a serious defect policy here.

What about universal terrace and all U. S. imports? Is that a policy that should be pursued?

The R N cy in the platform, they have a recipe al tariff act like the first term policy. And in the recipe, terrible that basically what we would do is U S. Is ignite a game.

The contest, pretty much every country has a higher terf out. And we have on them the average tariff the country charge us when we exported to the country is like around six to half, say, and for us, it's about three. And if we had a recipe able trade act that either we would go to six or they would go to three.

And it's interesting to think about which IT would be. But there are some countries like the bound terror for india, which is the backs when they can charge if they want, is fifty percent. So I think there's a lot of room for a trade policy to approve if we pass our a typical trade deck.

The issue about whether we should have a universal tariffs, there's a question of how I would coexist for the cipro acts and a big support of the recipe al acts, maybe the universal terr becomes a minimum, and that's something to be worked out. But recall that the term policy has to be passed by congress. If you have a specific security concern or anti dumping concern, which are the things that happened at the first truck of bitter strike that the by administration kept, then the creators have some authority to put a terrified the country if theyve been dumping, or they are like a threat to national security. But to do something we pig like the recipe al. Act would require legislation.

I then asked to red for his thoughts on terrorist.

I think there's a way to think about tariff s that involves china, about IT goes for them, that targeted caravans can help protect against unfair trade. And china continues to engage in unfair trade, especially through over capacity and seeking market share in areas where we are making some pretty deep investments. Those are targeted tariff S.

I think the keyword there is targeted, so targeted tariff s can be a tool to protect against unfair trade. China is an example where that remains important. But sweeping terrorists, they go beyond helping targeted sectors to broadly and pretty severely heading consumers and producers.

We've to a lot about how they could consumers because they work like in national sales packs. It's very important to remember terriers on intermediate goods heard are domestic producers. The way I put IT is we're happy to import this inflation.

We won't import the industrialized. We would still appreciate the benefits of robust trade flows, but we're going to stand up to trading partners who engage in unfair practices that have potential hello out key american sectors. We've seen that happen before. We don't want to stand by while this happens again. So while targeted terrace can be a useful tool, sweeping terrace can be really quite to drive the .

we then moved on to perhaps the clearest point of differentiation, corporate tax rates. Here's gerda view in our budget.

we've proposed that increase in corporate tax rates to twenty eight percent. I think there's some research suggesting some positive investment and growth effects from lower rates, but they tend to be economically small if you weigh them against the lost revenue. I can tell you how many times i've SAT with folks from the business community to say we need to get on A A more sustainable fiscal pt, and you need to cut our taxes.

And those two don't necessarily go together. Now if you want to talk about a tax system that has a much broader base and lower rates, that certainly a conversation washington tries to engaging IT often does get very far because everybody y's got their exemption, they want in the world we live in, we need to find a corporate rate that certainly facilitate robust investment and proper ability and yet brings a new revenue. We've certainly seen our CoOperation be highly successful at rates above twenty eight percent. So we think going to twenty eight would be a useful change.

Now here is Kevin.

Increase in the rate to twenty eight percent, which would be seven percent increase, the largest increase, the developed words, in the last few years, at a really damaging one, if you model IT. So if you consider that when we had a thirty five percent, I went to twenty one. And the joint tax community store for the whole thing was about three hundred billion over ten years.

So is almost ready to do true because of all the international stuff that we did and also the infrastructure ture, that there are a lot of things that were based brothers. And by the way, revolution to GDP, corporate revolution to GDP is higher now that IT was before the text cut back up IT. And so the africa affect the alzire in I rotate years ago showing that the U.

S. Was on the outside of africa corporate tax based that got proven exposed by the data. And so says IT was almost reputed to from thirty five to eight 8 is going weigh the other side where we were when we wrote thirty five because what we are thirty five， we had a much smaller base.

I also asked about another hot button n issue, taxing unrealized capital gains. Here's dit again.

we propose a prepayment tax against future realizations. One thing to recognize is that this only hits taxpayers above one hundred and million. How the air is all of been up there.

So it's just a few thousand folks. IT definitely kicks up the fairness in the code. Because once you get up there, and specially if you incorporate wealth, you see people paying effective tax rates that can be in the single digits.

And I want to make another point about this, that is probably under well, they're definitely folks argue, and I understand the argument that unrealized income is not income. Every day, you see folks using those assets as collateral for income generating investments. And in that sense, you have these assets working to growing coming away. That's currently are not text. We understand that this is something that is controversial in many market settings, but we think we can make a good case for .

and here's Kevin's view.

I think the taxi got a cruel is is just a wealth tax is a way to think about IT wealth taxes are really inefficient in our economic models. If you tax wealth, say at three percent, well, if like the risk free interest just three percent, then then like one hundred percent tax on. And so if introduced a hot person attack capital, come and let me tell you the near moscow loa, you're not going to have growth.

So the think about wealth taxes and taxi takes out a cruel is that IT seems like a small tax because you say charge three percent of life is only a three percent tax. But to think about what's the actual low effect of attacks out of stock is you have to translate into attacks our capital. And would you do that with, well, tax proposals? You end up with implicit taxes on capital income that can be close two hundred percent. And those are really dangerous ideas in terms of the potential harm to the economy.

There's also been discussion of expanding child and earned income tax credits. I asked IT if that was a good idea for the economy.

I don't think it's a good idea. I think it's a great idea. Both candidates were talking about some origin of this. And of course, during the american rescue place, we very significantly increased the the C T C, but also the A I T C. As well.

And we know that these measures help to reduce child poverty by a cut child harmony from something like twelve or thirteen percent to around six percent. And that kind of an intervention has been shown to paper at cell many times over. Because kids who get a Better economic start like that will have a much higher chance of reaching their potential and end up contributing to the economy in ways they want. otherwise. Those are great programs that have huge bank for box.

I ask Kevin the same .

question right now. Families with children certainly are the ones that then hit hardest by inflation. And I think what are the problems right, with an inflationary environment is that they're stuff that you can shift away from and stuff that you can.

And you find the elasticity of consumption for families with children tends to be much lower than for you. For me, we could go to the grocery store and look at the things that would up put in Price that that s which to other things. But again, families raising kids are going to want their milk in their bananas and so on. So I think the child credit is a very sound policy in terms of PPT unity, getting money into the hands of people who are raising kids. I don't have a model to tell you at the outward size of credit should be this more little question.

But what about the effects of all of these policies on the government's finances? I asked how important IT is to reduce the deficit.

Very important two things are clear. One is we don't face an imminent threat. I pay attention to this, a very granted level watching bid cover ratios in our auctions of U.

S. treasury's. And there is still very robust demand for us that highly liquid, highly efficient market.

And we are able to fund and service our debt without breaking much of the sweat that's back one, back two. We have to get on a more sustainable physical pet. Both of those are true.

And the problem is that as long as fact one is true, lawmakers have a very high discount rate for the future. When IT comes to fact too, it's sort of like that scene and jaws that says you're not going to believe shark out there and all bites you. I hope we don't have to wait for a forcing event, but unfortunately, that's so open the way these things play out.

And here's Kevin's view on reducing the deficit.

IT will be a priority for whatever administration comes in by a necessity because the debt to G, D, P is so high, the deficit to GDP is so high, the a debt limit is hit probably around next march, but they can always fit around and then get into june.

So is gonna be a big budget showdown next year? But if you look at revote to GDP and speed to GDP, revolute to GDP the trouble of reduction of above historic norms, even with the tax cuts, it's the spending that went up because cover and then stayed up because IT created room for the next to bit strained to continue study. It's really what you look at the problem of not really to GDP, at least compared to horses. It's spending to GDP, which is four percent or GDP higher than the Normally husband.

So we could be set for a showdown with both sides potentially agreeing that the deficit should come down, but disagreeing on whether more taxes or reduce spending is the way to get there. And of course, the election will play a major role in determining who wins that fight. Let's leave IT there for now.

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