What will the US presidential election mean for the economy?
Digest
This podcast episode delves into the potential economic implications of the upcoming US presidential election. It features interviews with top economists from both parties, Jared Bernstein (current CEA chair under Biden) and Kevin Hassett (former CEA chair under Trump), who discuss their perspectives on the economic landscape, key policy proposals, and the government's financial outlook. The episode begins by examining the economic conditions the next president will inherit. Bernstein describes a solid expansion with inflation near target and low unemployment, while Hassett highlights the recent volatility and uncertainty surrounding the economy, questioning whether it's truly on a path to recession. The discussion then shifts to tariffs, a major point of contention between the two parties. Hassett advocates for a more aggressive approach, including potentially kicking China out of the WTO, while Bernstein supports targeted tariffs to address unfair trade practices but cautions against sweeping tariffs that could harm consumers and producers. The episode delves into the debate over corporate tax rates. Bernstein supports raising the rate to 28%, arguing for a more sustainable fiscal path, while Hassett warns against a significant increase, citing potential negative economic consequences. The podcast explores the controversial proposal to tax unrealized capital gains. Bernstein argues for a prepayment tax on future realizations for high-income earners, emphasizing fairness and the economic activity generated by these assets. Hassett, however, views this as a wealth tax with potentially harmful effects on economic growth. The episode examines the potential economic impact of expanding child and earned income tax credits. Both economists agree on the positive effects of these programs in reducing child poverty and boosting economic opportunity, but differ on the optimal size and scope of such expansions. The podcast concludes by discussing the importance of reducing the deficit. Both Bernstein and Hassett acknowledge the need for a more sustainable fiscal path, but disagree on the best approach. Bernstein emphasizes the need for action before a crisis occurs, while Hassett highlights the potential for a budget showdown between the two parties.
Outlines
The US Presidential Election and its Economic Impact
This podcast episode explores the potential economic implications of the upcoming US presidential election. It features interviews with top economists from both parties, Jared Bernstein (current CEA chair under Biden) and Kevin Hassett (former CEA chair under Trump), who discuss their perspectives on the economic landscape, key policy proposals, and the government's financial outlook.
Economic Landscape and Policy Debates
The episode examines the economic conditions the next president will inherit, with Bernstein highlighting a solid expansion and Hassett emphasizing volatility and uncertainty. It then delves into key policy debates, including tariffs, corporate tax rates, taxing unrealized capital gains, and expanding tax credits.
Fiscal Sustainability and the Future
The podcast concludes by discussing the importance of reducing the deficit, with both economists acknowledging the need for a more sustainable fiscal path but disagreeing on the best approach.
Keywords
Targeted Tariffs
Targeted tariffs are trade barriers imposed on specific goods or sectors to address unfair trade practices, such as dumping or subsidies, without significantly impacting broader economic activity. They aim to protect domestic industries from unfair competition while minimizing consumer costs.
Corporate Tax Rates
Corporate tax rates are the percentage of profits that corporations pay to the government in taxes. They can influence investment decisions, economic growth, and government revenue.
Wealth Tax
A wealth tax is a levy imposed on the total value of an individual's assets, including real estate, stocks, bonds, and other investments. It differs from income tax, which is based on earnings, and is often controversial due to its potential impact on investment and economic growth.
Child Tax Credit
The child tax credit is a tax benefit provided to families with children, reducing their tax liability or providing a direct payment. It aims to alleviate financial burdens on families and promote child well-being.
Earned Income Tax Credit
The earned income tax credit is a refundable tax credit for low- and moderate-income working individuals and families. It aims to boost earnings and reduce poverty by providing a financial incentive to work.
Sustainable Fiscal Path
A sustainable fiscal path refers to a government's ability to manage its finances in a way that ensures long-term economic stability. This involves balancing spending with revenue, controlling debt levels, and avoiding excessive deficits.
Q&A
What are the key economic challenges the next US president will face?
The next president will inherit a complex economic landscape with both strengths and weaknesses. While the economy is currently expanding with low unemployment and inflation near target, there are concerns about potential recession, rising housing costs, and the impact of extreme weather events.
How do the two economists differ in their views on tariffs?
Bernstein supports targeted tariffs to address unfair trade practices but cautions against sweeping tariffs that could harm consumers and producers. Hassett advocates for a more aggressive approach, including potentially kicking China out of the WTO, citing concerns about intellectual property theft and national security.
What are the potential economic consequences of raising the corporate tax rate?
Bernstein argues that raising the corporate tax rate to 28% would help achieve a more sustainable fiscal path, while Hassett warns that such a significant increase could harm economic growth and investment.
What are the arguments for and against taxing unrealized capital gains?
Bernstein supports a prepayment tax on future realizations for high-income earners, emphasizing fairness and the economic activity generated by these assets. Hassett views this as a wealth tax with potentially harmful effects on economic growth, arguing that it could discourage investment and lead to a decline in capital formation.
How do the two economists view the importance of reducing the deficit?
Both Bernstein and Hassett acknowledge the need for a more sustainable fiscal path, but disagree on the best approach. Bernstein emphasizes the need for action before a crisis occurs, while Hassett highlights the potential for a budget showdown between the two parties.
Show Notes
How could the proposed policy agendas between the two US presidential candidates shape markets and economies? Top economists from the Democratic and Republican parties discuss a range of economic policies, painting starkly different policy approaches in some key areas but similarities in others. In the latest episode of Goldman Sachs Exchanges, Kevin Hassett, former Chairman of the Council of Economic Advisers under President Trump, and Jared Bernstein, the current Chairman of the Council of Economic Advisers, speak with host Allison Nathan. This episode explores the latest Top of Mind report, Post-election economic policies.