How Biden’s presidency could affect the economy

Democrat Joe Biden’s victory in the presidential race will provide a boost to a U.S. economy battered by the COVID-19 pandemic as his bold spending plans and stauncher support for trade and immigration more than offset the drawbacks of new taxes and regulations, top economists say. Biden’s blueprint will bring back the 11 million jobs and $670 billion in annualized gross domestic product wiped out – and not yet recovered – in the crisis more rapidly than if President Donald Trump had won a second term, analysts say.

“Biden’s policies are the right ones to address the economic crises created by the pandemic,” said Mark Zandi, chief economist of Moody’s analytics. “With such high unemployment, low inflation and zero interest rates, Biden’s proposal to go big on government investment will get us back to full employment fastest. His policies are also targeted to help low- and middle-income households hit hardest by the pandemic.”

Yet the scope of the economic benefits delivered by Biden’s agenda hinges on whether Republicans keep narrow control of the Senate, as now seems likely, or Democrats gain a slim edge. The outcome is uncertain amid ongoing vote tallies in local races, and final results may not be clear until early next year because of runoff races.

A Biden presidency and Republican Senate would mean a smaller economic boost than a sweep that hands a slight majority to Democrats. Under the former scenario, the economy would grow an average 3.5% a year and generate 11.6 million jobs during Biden’s four-year term, according to Moody’s. That would be just modestly better than average growth of 3.2% and 9.8 million new jobs under the status quo – a second Trump term with the current split Congress, Zandi estimates.

If Biden could work with a Democratic-controlled Senate, the economy would grow more vigorously – an average 3.8% a year, creating 14.1 million new jobs, according to the Moody’s analysis. The nation would return to full employment by late 2022, a year earlier than under a Biden presidency and Republican Senate, Zandi predicts.

Here’s how a Biden plan could affect the economy:

Biden has voiced support for a robust relief measure that includes another federal bonus to weekly unemployment benefits, more aid for struggling small businesses and financially distressed states, and another round of stimulus checks to most households.

The big question: Which party has the majority in the Senate? Last month, the Democratic House passed a $2.2 trillion package, while the Republican Senate has favored a $500 billion plan. If Republicans keep control, lawmakers likely would approve a $1.5 trillion stimulus, possibly late this year, according to Moody’s Analytics and Oxford Economics. If the Democrats wrest control, Zandi expects a $2 trillion package that could match the $600 jobless aid provided to unemployed Americans earlier this year instead of a reduced amount.

But economist Nancy Vanden Houten of Oxford Economics believes even a Democratic Senate would opt for a $1.5 trillion measure to preserve space for other spending initiatives.

Biden proposes longer-term spending

Biden is proposing $7.3 trillion in new spending over 10 years, including upgrading the nation’s roads, bridges and highways; building a clean energy economy; investing in research and development to bolster manufacturing; ensuring the government and its contractors buy American products; providing tuition-free community college; ensuring access to affordable child care and universal preschool; and providing aid for Americans to buy or rent homes.

The flurry of programs will create new economic output, generate millions of jobs, help workers better prepare for high-skilled positions and increase the nation’s productivity, or output per worker, Zandi said. If Democrats narrowly win the Senate but Republicans can block major legislation with 40 votes, Senate Democrats will have to compromise with Republicans, likely trimming the $7.3 trillion blueprint to about $4 trillion, Zandi said. Oxford economist Gregory Daco foresees a more dramatic cut to about $3 trillion.