Tag Archives: United States

5 Ways Joe Biden’s Presidency Will Affect Your Money – and How to Act Now

By Farnoosh Torabi – As with any new President, Joe Biden will have his work cut out for him when he takes the oath of office in January. And while his “build back better” plans are already laid out, it’s yet to be seen how much of an impact his administration can actually make on your finances.

The COVID-19 pandemic’s not behind us, so the recovery will be slow, which Biden has been clear about. Not to mention, with a very possible Republican Senate majority, many of the new administration’s initiatives could face serious pushback, if not a total squashing. The outcome will be determined in a couple months when Georgia’s two Senate run-off races happen.

In short, we can’t read far into what Biden is proposing and use it as a playbook for our personal finances today. “I’m not a big fan of people overhauling their finances or making moves on a presumption of something passing, simply because there are just too many unknowns,” Greg McBride, Chief Financial Analyst at Bankrate.com, told me on my podcast.

Here’s a breakdown of some of the major economic initiatives proposed by President-elect Joe Biden and Vice President-elect Kamala Harris, and how to interpret them for the sake of our financial well-being. As always, personal accountability will be just as — if not more — important than matters of policy. more>

America’s Foreign Enemies Mostly Hope for a Joe Biden Win; Allies Are Divided

Neewsweek – Nations around the world are watching the U.S. election with almost the same intensity as Americans at home, and while they can’t vote, they have passionate rooting interests.

During his four years in the White House, President Donald Trump has been accused of having a soft spot for the dictators of America’s enemies. Do those countries return the love? As the 2020 election looms, the leaders and citizens of both America’s allies and rivals are hoping for outcomes that may be surprising.

With the exception of North Korea, most U.S. adversaries such as Cuba, Iran, China and Venezuela are hoping for a Joe Biden win, while America’s allies are split. Germany, Japan and Australia would like to see Biden in the White House; India, Saudi Arabia, Israel and the U.K. hope Trump remains in power.

The former vice president’s chief asset appears to be his predictability: with few exceptions, even the nations hoping for a second Trump term think they can work with a Biden administration. And for some countries, like Russia, the optimal outcome is neither Biden nor Trump, but chaos. more>

Related>

It’s the most important election in our lifetime, and it always will be

We never know how important an election really is until long after it’s over.
By Ezra Klein – “There’s just one month left before the most important election of our lifetime,” Democratic presidential nominee Joe Biden tweeted in early October.

Two days later, Sen. Bernie Sanders backed him up. “This is the most important election, not only in our lifetime but in the modern history of our country,” he said in Michigan.

In 2016, it was Donald Trump deploying the cliché. “This is by far the most important vote you’ve ever cast for anyone at any time,” he said.

I won’t be coy with my view: I think the most important election of my lifetime was 2000, and I’ll defend that view in this piece. But more interesting than the parlor game is the framework of this debate. What makes something the most important election of a lifetime? How would we know?

Before 2016, the campaign in which I heard the “most important election of our lifetime” talk most often was 2004, when George W. Bush ran for reelection against John Kerry. It certainly felt pivotal. It was a referendum on the Iraq War, which was built on lies and carried out by fools, and left Iraq soaked in blood. It was also a referendum on the hard right turn Bush had taken in office, away from “compassionate conservatism” and toward neoconservatism abroad, and a politics of patriotic paranoia at home.

Kerry lost that election. And yet, in retrospect, it clearly wasn’t the most important election of my lifetime, and it may even have been better that Kerry lost it. The ensuing four years forced Bush, and the Republican Party he led, to take responsibility for the disasters they’d created. The catastrophe of the Iraq War became clearer to the country, leading to a Democratic sweep in 2006. The financial crisis, which had been building for years, exploded, leading to Barack Obama’s election and the massive congressional majorities that passed the Affordable Care Act. more>

Reviving transatlantic relations after Trump

If Joe Biden were to win the White House, transatlantic relations could return to default or be transformed—with much depending on how Europe reacted.
By Max Bergmann – A political cliché is rehearsed every four years in the United States: ‘This is the most important election of our lifetime.’ Yet it is hard to think of a more important election in US history—rarely, if ever, has the country faced two such sharply divergent paths.

All its deep-seated divisions have been exposed in 2020. Covid-19 has foregrounded the jaw-dropping inequality, the frailty of a for-profit healthcare system and the impact of a generation-long, conservative effort to weaken the functioning of government. When Americans needed the state, the state couldn’t cope.

Economically, Wall Street hasn’t missed a beat but queues for food banks grow and ‘for lease’ signs populate vacant shop fronts. Socially, the murder of George Floyd in Minneapolis in May and the subsequent protests—believed to be the largest in US history—brought into the mainstream a conversation on systemic racism and exposed the abusive nature of law enforcement, militarized and immunized from public sensitivity after ‘9/11’.

Globally, as Covid-19 struck, the US withdrew from the world, failing to lead or even participate in a transnational response. Indeed, in the midst of a pandemic, the administration led by Donald Trump pulled out of the World Health Organization, its ineptness an international embarrassment.

This does make the coming election existential. If Trump were to be re-elected president, all these trends would worsen—with dire implications for the transatlantic alliance. If not, it might be thought an incoming Democratic administration, facing such domestic turmoil, would relegate foreign policy to the second tier. But that wouldn’t be the case if Joe Biden were to prevail.

The crises of the last year have been humbling for the US and there is broad recognition that it will need allies and partners as never before. Biden would be a foreign-policy president. During the administration of Barack Obama he was a central and active foreign-policy player. His experience as chair of the prestigious Senate Foreign Relations Committee was, after all, a major factor in Obama selecting him as running mate. For the last two decades, Biden has been consumed with international relations and his inner circle of trusted advisers are experienced professionals.

A new administration would therefore hit the ground running. The question is: where would they run to? more>

Trump took a sledgehammer to US-China relations. This won’t be an easy fix, even if Biden wins

By Hui Feng – Few would have thought a US-China relationship marked by relative stability for half a century would be upended in just four years.

But US President Donald Trump’s privileged tour of the Forbidden City in November 2017 by Chinese President Xi Jinping now looks like it happened in a bygone era, given the turbulence in the bilateral relationship since then.

The shift in the US’s China policy is no doubt one of the major legacies of the Trump administration’s foreign policy, alongside a renewed peace process in the Middle East.

When Trump’s daughter Ivanka said at the Republican National Convention that “Washington has not changed Donald Trump, Donald Trump has changed Washington”. This would certainly include its handling of China.

Although China’s rise had been a concern of the previous Bush and Obama administrations, it was the Trump administration that transformed the entire narrative on China from strategic partner to “strategic competitor”, starting with its National Defense Strategy report released just one month after Trump’s 2017 China visit.

This read, in part,

China and Russia want to shape a world antithetical to US values and interests. China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model and reorder the region in its favor.

This new way of thinking deemed the US’s decades-long engagement strategy, deployed since President Richard Nixon in the early 1970s, a failure.

Prior to Trump, the US had sought to encourage China to grow into a responsible stakeholder of a rules-based international order.

But the Trump administration believes such “goodwill” engagement has been exploited by China’s “all-of-nation long-term strategy” of asserting its power in the Indo-Pacific region.

According to the Trump administration, this is centered on “predatory economics” in trade and technology, political coercion of less-powerful democracies and Chinese military advancement in the region. more>

Budget 2020: promising tax breaks, but relying on hope

By Peter Martin – Tax cuts aren’t the half of it.

The personal income tax cuts promised in the budget will cost A$17.8 billion over four years.

The measures aimed at supporting businesses – the temporary instant tax write off of capital investments, the temporary ability to use losses to reduce previous tax payments, the JobMaker hiring credit and the enhanced apprentice wage subsidy — will cost $26.7 billion, $4.8 billion, $4 billion and $1.2 billion.

That’s a total of $36.7 billion — a subsidy for private businesses without precedent.

The clumsy wording in the part of the budget that sets out strategy says the aim is to “drive sustainable, private sector-led growth and job creation”.

‘Driving private sector-led growth’

Driving private sector-led growth doesn’t quite make sense, but it’s easy to get a handle on what it means.

By itself, business isn’t in a position to drive much.

Even with the budget measures – even with the Australian Taxation Office allowing most businesses to write off everything they spend on equipment over the next two years – non-mining business investment is expected to collapse 14.5% this financial year and bounce back only 7.5% the next. more>

The politics of currencies

Adam Tooze argues that worrying about the euro exchange rate and a non-existent inflation enemy in Europe must give way to fiscal and monetary demand boosts.
By Adam Tooze – On September 10th, as they waited for the European Central Bank press conference, market actors and financial commentators held their collective breath. The eurozone sovereign-debt markets were calm, the Pandemic Emergency Purchase Program has ample headroom and the euro-area economy was showing signs of recovery. Yet the anxious question hanging over the event was whether ECB officials would mention the euro’s recent appreciation against the dollar—and, if so, what words would they use?

It may sound odd, but for a central bank to talk about exchange rates is at odds with the prevailing model of central banking in advanced economies. The central focus of that regime is price stability, which is to be achieved by inflation-targeting. Originally, the aim of the central bank was to keep inflation, as measured by a battery of domestic price indices, below 2 per cent per annum. Fear of inflationary overshooting is increasingly obsolete, though it lingers in some parts of Europe. The main concern today is to ensure that inflation stays reasonably close to 2 per cent, so there is not a slide into deflationary territory.

The exchange rate is left to be decided by the daily flux of trillions of dollars in the foreign-exchange markets. If a central bank is doing its job in stabilizing domestic prices, it ought to have nothing to fear from the currency markets—or so the theory goes. If all central banks adopt similar price-stability targets, then there should be even less reason for destabilizing currency movements.

It is not just unnecessary to target exchange rates. Not doing so is a concomitant of the basic logic of central-bank governance since the 1980s—the depoliticization of money. For national central banks to openly discuss exchange rates risks politicizing international financial relations. more>

11 ways to fix America’s fundamentally broken democracy

A plan for the democratic revolution America needs
By Ian Millhiser – The United States has a president who received nearly 3 million fewer votes than his Democratic opponent. Currently, over half the country lives in just nine states, which means that less than half of the population controls 82 percent of the Senate. It also means that Republicans hold a majority in the Senate despite the fact that Democratic senators represent more than half of the American people.

Intentional efforts to make it harder to vote, such as voter ID laws, are increasingly common throughout the states — and the Supreme Court frequently approaches such voter suppression with indifference. Gerrymandering renders many legislative elections irrelevant — in 2018, Republicans won nearly two-thirds of the seats in the Wisconsin state assembly, even though Democratic candidates received 54 percent of the popular vote. Wealthy donors flood elections with money, as lawmakers spend thousands of hours on “call time,” dialing the rich to fund the next campaign.

And looming over all of this is the problem of race. In some states, Republican lawmakers write voter suppression laws that target voters of color with, in the word of one federal appeals court, “almost surgical precision,” knowing that a law that targets minority votes will primarily disenfranchise Democrats.

Congressional Democrats are acutely aware of many of these problems. And they’ve devised some fairly aggressive plans to combat these attacks on the franchise. more>

Why 5G is the first stage of a tech war between the U.S. and China

By Prabir Purkayastha – The U.S. tech war on China continues, banning Chinese equipment from its network, and asking its Five Eyes partners and NATO allies to follow suit. It is a market and a technology denial regime that seeks to win back manufacturing that the U.S. and European countries have lost to China.

International trade assumed that goods and equipment could be sourced from any part of the world. The first breach in this scheme was the earlier round of U.S. sanctions on Huawei last year, that any company that used 25 percent or more of U.S. content had to play by the U.S. sanction rules. This meant U.S. software, or chips based on U.S. designs, could not be exported to Huawei. The latest round of U.S. sanctions in May this year stretched the reach of U.S. sanctions to cover any goods produced with U.S. equipment, extending its sovereignty well beyond its borders.

In the last three decades of trade globalization, the U.S. has increasingly outsourced manufacturing to other countries, but still retained control over the global economy through its control over global finance—banks, payment systems, insurance, investment funds. With the fresh slew of sanctions, another layer of U.S. control over the global economy has been revealed: its control over technology, both in terms of intellectual property and critical manufacturing equipment in chip making.

The new trade sanction that the U.S. has imposed is in violation of the World Trade Organization’s rules. It invokes national security, the nuclear option in the WTO, on matters that are clearly trade-related. Why the U.S. has gutted the WTO, refusing to agree to any new nominations to the dispute settlement tribunal, has now become clear. China cannot bring the illegal U.S. sanctions to the WTO for a dispute settlement, as the dispute settlement body itself has been made virtually defunct by the United States.

The battle over 5G and Huawei has become the ground on which the U.S.-China tech war is being fought. The 5G market (including installation and network equipment) is expected to reach $48 billion by 2027, but more importantly, it is expected to drive trillions of dollars of economic output over the installed 5G networks. Any company or country that controls the 5G technology will then have an advantage over others in this economic and technological space. more>

Updates from Chicago Booth

How effective were stimulus checks in the US?
By Áine Doris – As the United States was hit with COVID-19, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act in an attempt to soften the blow from widespread lockdowns and business closures that led to soaring joblessness.

The CARES Act—which included one-time cash payments of $1,200 or more to households starting in April—bolstered incomes and spurred spending as promised, although the effect was uneven, suggests research by Northwestern’s Scott R. Baker, Columbia’s R. A. Farrokhnia, University of Southern Denmark’s Steffen Meyer, Columbia’s Michaela Pagel, and Chicago Booth’s Constantine Yannelis. The researchers conducted an almost real-time review of how a significant slice of the population used the direct payments.

The stimulus prompted an immediate, general uptick in household spending, the researchers find, but households with cash on hand tended to save their stimulus checks, while those without cash on hand spent almost half their checks within 10 days.

The researchers tapped newly accessible data from SaverLife, a nonprofit organization that helps families develop long-term saving habits. The SaverLife data provided detailed, high-frequency information including day-to-day inflows, outflows, and balances of anonymized individual bank accounts. This enabled the researchers to analyze the impact of the CARES payments on households, taking into account changes in overall income level, cash flow, and existing liquidity.

Using data on more than 6,000 US households for April, the researchers calculated households’ marginal propensity to consume―the proportion of every dollar received that they spent from the moment they received the CARES payments.

“We wanted to understand the multiplier effect of CARES payments―how when the government gives you a dollar, you spend it and effectively give someone else a dollar, who then goes on to spend it, giving someone else a dollar, and so on,” Yannelis says. “This is how fiscal stimulus works, so you have to look at people’s marginal propensity to consume to assess the multiplier effect.”

The researchers find a sharp and immediate response as payments started hitting bank accounts. Within the first 10 days, households spent an average of 29 cents from every dollar received. The bulk of this spending was on food, rent, and bills, most likely in response to the shelter-in-place directives and supply-chain restrictions. The spending couldn’t significantly benefit the restaurant, services, and hospitality industries because they were largely shut down to slow the spread of the pandemic. more>

Related>