President Joe Biden's Economic Agenda

On the 20th of January 2021, Joseph R. Biden was sworn in as the 46th president of the United States. But, what is President Biden’s proposed economic agenda as the new leader of one of the world’s largest economy?

Image Source: AP News

As of now, President Biden has proposed a US$1.9 trillion (RM7.6 trillion) stimulus package to combat the economic downturn caused by the coronavirus pandemic. One of the items in the proposed legislation includes investing $400 billion to tackle the pandemic directly through increased testing and improving vaccine deployment and distribution. President Biden also proposes handing out $1 trillion in direct aid to households through a $1400 direct payment to those under certain income thresholds, supplementing the $600 stimulus check that Americans received in December. He also plans to extend emergency unemployment insurance programs and raise the payments received to $400 per week. Additionally, he plans to spend $440 billion to support local communities that have been hit hard by the coronavirus by providing grants and loans to small businesses, and assistance to school districts, as well as state and local governments. The coronavirus relief plan will be funded entirely with government borrowing and would be added to the country’s deficit.

President Biden has also outlined economic policies in matters such as trade, taxation, investment in infrastructure, and reform the US education system, healthcare system, and labor market. The Biden administration is expected to repeal several of the Trump administration’s economic policies such as tax cuts for the wealthy. President Biden is pursuing a more progressive tax plan where high-income households pay a higher tax rate than do low-income taxpayers. He promises to raise the corporate income tax rate from 21% to 28%, raise the top income tax rate back to 39.6%, and not raise taxes for anyone earning below US$400,000 a year. The administration’s pro-growth taxation is expected to raise almost $4 trillion in additional tax revenue for the US federal government over the next 10 years by increasing taxes for corporations and high-income individuals. However, economists have warned that increasing taxes at the wrong time could slow down economic recovery from the pandemic.

Through his “Buy American” plan Biden plans to revitalize America’s manufacturing industry and create 5 million new jobs through government purchasing while using subsidies, federal matching, and incentives to make American products more competitive. In this plan the government would spend $400 billion to buy American goods and services and $300 billion would be invested in research and development, with half going to clean energy research. President Biden also plans to spend $1.3 trillion on infrastructure over a decade which includes spending $50 billion in his first year in office on repairing roads, highways, and bridges, and $20 billion on rural broadband infrastructure. He has also called for investments in America’s electrical grid, rail system, high-speed rail, clean energy resources in an attempt to spur job growth and secure the country’s leadership in these industries by returning to a more localized supply chain, the need for which was highlighted by the COVID-19 pandemic and the widespread shortages it caused. Some of these projects would be financed by the government revenue gained from the proposed tax increases.

Image Source: Star Tribune

With regard to the labor market, Biden campaigned on raising the federal minimum wage from $7.25 to $15 an hour. Raising the minimum wage could stimulate the economy as tens of millions of low-wage workers would have more money to spend, though it could cost some their jobs. His administration also aims to strengthen labor protections and trade union rights by reforming labor laws to give workers more collective bargaining power during disputes at work by holding companies and executives accountable for retaliating against employees' efforts to organize and violate other labor laws. Biden’s trade policy also focuses on bolstering workers’ skills US manufacturing industries remain competitive instead of enforcing protectionist policies. Biden describes most foreign nations as potential trading partners and seeks to restore traditional international alliances and re-engage globally in multilateral trading. He seeks to work with U.S. allies to present a united front in trade disputes with China. Instead of imposing tariffs, he prefers rules-based international trade that opens markets to US goods and services while still protecting American workers. The Biden administration's less nationalistic trade policy coupled with some American companies looking to diversify their supply chains away from China could have a positive spillover effect on the Malaysian economy which counts the US as its third-largest trading partner.

It is clear that the Biden administration’s economic policy is focusing on domestic priorities such as combatting the Covid-19 pandemic, revitalizing the middle class, and preventing the US economy from falling deeper into recession with the government playing a more proactive role compared to the previous administration.

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About the Author

Mohamad Eikhmal Eldin is currently in his 2nd year of studying Economics and International Economics. He enjoys learning about different economic systems and perspectives. In his spare time, he enjoys reading about world history.