Update 791 – 90 Minutes in Atlanta:
Record and Vision, Boom and Gloom
When President Biden and Donald Trump meet tomorrow night in the first presidential debate of the 2024 campaign, viewers will see competing renditions of the economic record and visions of the path to prosperity, at a time when Americans are ever so slowly coming to a more sanguine view of the economy. The macroeconomic facts may be wind behind Biden’s back, but Trump will try to turn boom into gloom.
The economy remains the top issue of concern to voters this cycle. The cost of living will be front and center in the economic debate but other component issues ranging from taxes to tariffs are bound to get aired. Below, we preview these issues and others, offering our view of how we’d like to see President Biden make his case and what to watch for as Trump seeks to spin and distract.
Best,
Dana
Tomorrow, President Biden and former President Donald Trump have a return engagement after debating in 2020. The agreement to stage a rematch between the presidential contenders required the negotiation of a strict set of rules following a chaotic showdown last cycle in which Trump interrupted Biden over 70 times, spurring concern about whether the two candidates could agree to terms to meet again on the debate stage.
The most recent national polling shows both candidates neck and neck. On the economy specifically, 58 percent of registered voters in presidential battlegrounds trust Trump to do a better job than President Biden while 36 percent trusted Biden over Trump, according to a May 2024 New York Times/Siena poll, making tomorrow’s debate a critical opportunity for Biden to narrow the gap and demonstrate for voters a stark contrast of record and vision. Today, we outline key economic issues that are likely to and should be addressed in the debate, and offer talking and rebuttal points President Biden can use to augment his economic policy case for a second term.
Inflation and Working to Lower Costs of Living
President Biden led America’s post-pandemic recovery, the strongest rebound of the world’s advanced economies. Inflation has fallen drastically from its peak of 7.1 percent in June 2022 to 2.7 percent according to the latest personal consumption expenditures index data, but the impact of high prices continues to resonate with Americans.
Source: Council of Economic Advisers
Trump will certainly take the opportunity to blame the post-pandemic inflation on President Biden, as he and Republican allies have consistently done over the past several years, ignoring the contribution of exogenous factors such as increased global commodity prices, pandemic-related supply chain disruptions and corporate greed to price increases over that period.
President Biden should acknowledge the burden of high costs Americans face, particularly as they seek to cover everyday expenses like housing, food, and gas. After underscoring the significant progress inflation has made, with the Consumer Price Index falling from an annualized peak of over nine to close to two percent, Biden should highlight his administration’s work since day one to bring costs down and allow Americans to keep more of their hard-earned money.
Research shows that corporate profits drove over 50 percent of inflation during the second and third quarters of 2023. The Biden administration called on corporations to pass the savings from their reduced costs as pandemic-induced stresses eased onto consumers and took significant steps to rein in junk fees. From capping the cost of insulin at $35 a month to cutting credit card late fees from an average of $32 to $8, the administration has taken action to save consumers billions in fees.
Unemployment and Wages
Biden will need to highlight the remarkable strength of the labor market and gains made by workers during his tenure. 15 million jobs have been created during his administration, with May representing the forty-first consecutive month of job growth. At the same time, the unemployment rate has remained at or below four percent for the longest such stretch in over 50 years. Wage growth has outpaced inflation over the course of President Biden’s first term in office, though many Americans still feel that inflation has eaten into their incomes.
At a time when a sizable majority of Americans do not feel confident in the economy, President Biden needs to convince Americans that job growth is much better now than under Trump without coming across as condescending to people who genuinely feel that they are struggling economically. Under Trump, the economy lost nearly 3 million jobs, the worst record of any modern president. Many Americans only remember the relatively good economic years of Trump’s early presidency and not the pandemic when most of those jobs were lost. President Biden should remind people of the real impact Trump had on jobs during his presidency while drawing a contrast with his own successful job record.
In playing up his support for workers, President Biden can also tout his strong pro-union record. He is arguably the most pro-worker president since FDR, using his position to implement project labor agreements for federal construction projects. He is also the first president to walk a picket line and has earned the endorsement of several major unions including United Auto Workers. Despite his anti-union record, Trump has put considerable effort into courting union voters, going as far as inviting Teamster president Sean O’Brien to speak at the Republican National Convention. The reason for this is clear: support for unions is strong amongst blue-collar families, a crucial voting block in states such as Michigan, Wisconsin, and Pennsylvania. As such, President Biden would do well to highlight his well-established support for organized labor while attacking Trump for his rather lackluster support.
Tax Policy: Equity and Fiscal Responsibility
Tax will undoubtedly be an important topic in tomorrow’s debate, as the individual provisions of Trump’s landmark Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025. The balance of power heading into this “tax fight” will be determined by November’s election, and it may be one of the few meaningful opportunities to address federal revenues head-on in the near future.
Complicating this debate are competing views about the economic success of the TCJA. While some Republicans like Donald Trump argue that the cuts paid for themselves, the economic data does not confirm this. Distortions from COVID and the wide-sweeping nature of the 2017 cuts make it hard to define the source of economic changes since the policies went into effect, but it is clear that the effect was not dramatic. One thing we do know for sure is that the benefits of the TCJA have so far overwhelmingly been enjoyed by the wealthy and corporations.
Through his FY25 budget proposal, President Biden has laid out a myriad of revenue-raising provisions at his disposal in the tax policy debate. His policies, which would keep tax cuts for Americans who make less than $400,000 per year while increasing the share of taxes paid by the wealthy and corporations, would fund new government spending/programs while also cutting the national deficit by $3 trillion over the next 10 years. He has focused his messaging on increasing revenue from wealthy individuals and corporations to allow for direct investment in the American people as opposed to waiting for benefits to trickle down from the top.
By contrast, Trump will argue for an across-the-board extension of expiring TCJA provisions at a projected cost of $4.6 trillion over the next 10 years. He has also proposed further lowering the corporate tax rate from 21 to 20 percent, which would cost roughly $130 billion over ten years, and exempting tip income from the federal income tax, which would cost $150 to $250 billion over 10 years. He has floated ideas such as increasing tariffs and cutting wasteful spending to “pay” for the tax cuts but has not explained how this would be possible.
To push back against Trump’s plans, Biden can claim the mantle of fiscal responsibility during the debate in addition to his record and plans to restore equity and fairness in the tax code. Though Republicans have traditionally been the party of fiscal responsibility, Trump’s failure to acknowledge the implications of another round of unproven tax cuts is a key vulnerability open to attack by Biden, who has explicit plans not only to stabilize the debt but to pay it down over the longer term. Just this week, the Committee for a Responsible Federal Budget published a paper asserting that Trump contributed twice as much to the national debt as Biden when excluding COVID relief ($4.8 trillion to $2.2 trillion), allowing Biden to highlight the past in addition to his vision for the future.
Housing: the Quiet Crisis
Addressing housing will be a challenge for President Biden during the debate. Housing costs have skyrocketed over the past couple of years, and tens of millions of Americans are now “cost-burdened,” spending more than one-third of their income on housing, as the result of a shortage of between 4 and 7 million homes in America, pushing up home prices, while high interest rates putting upward pressure on mortgage rates, making homes even less affordable. With this in mind, it is little surprise that housing costs were the second most important financial problem facing American families behind inflation, according to a poll from Gallup.
President Biden has taken no major legislative action on housing. Build Back Better originally included sweeping action on housing, including a $24 billion expansion of the Housing Choice Voucher program and $65 billion for home renovations, but these provisions never made it into law. But Biden has taken more piecemeal executive actions in recent months to address the affordable housing crisis, including his award of $85 million to HUD’s Pathways to Removing Obstacles (PRO) to Housing program. If President Biden wants to win voters over on housing, he needs to assert a bold vision for his second term against nothing offered here to date by Trump, save his paltry and suspect Opportunity Zone tax break for developers. President Biden proposed housing reforms, including following his State of the Union address, such as relief for renters and measures to lower the cost for first-time home buyers.
Student Loan Relief Efforts
President Biden’s actions on student loans will undoubtedly be a point of contention during the debate. A majority of voters say they disapprove of President Biden’s handling of the issue. As such, Biden needs to use this opportunity to sell his actions on student loans. Biden will tout efforts on student loan forgiveness, while Trump will argue that student loan forgiveness is an unfair waste of taxpayer dollars. To date, President Biden has forgiven $167 billion in student loans for nearly 5 million borrowers. This number would have been $400 billion for nearly 40 million borrowers if it had not been for Trump appointees on SCOTUS, a fact that the President would do well to point out.
Trump has capitalized on the political divide over student debt forgiveness to attack the program as unfair to the millions of Americans who either do not have federal student loans or have already paid them off. President Biden could counter by arguing that forgiveness is good for the broader economy, not just borrowers: some economists have argued that forgiveness stimulates economic growth by unburdening borrowers and boosts entrepreneurship and small business creation. President Biden needs to sell student loan forgiveness as good for America as a whole, not just a privileged few as detractors have portrayed it.
Tariffs and Trade Policy
With President Biden’s recent announcement of $18 billion worth of tariffs on annual imports from China, including a 100 percent tariff on electric vehicles and a 50 percent tariff on semiconductors, tariffs and trade policy will likely be a topic in Thursday’s debate.
Shortly after Biden’s announcement, Trump criticized Biden and subsequently proposed a tariff hike of up to 60 percent on Chinese imports while also introducing plans for a 10 percent tariff on goods from all countries entering the U.S. The former president has also mentioned that these widespread tariff hikes could replace the federal income tax altogether.
To refute Trump’s proposals, President Biden could point out that some estimates have shown tariffs would need to be increased to 70 percent across the board to generate enough revenue to replace the federal income tax. The Center for American Progress also found that Trump’s 10 percent across-the-board proposal would actually cost Americans an extra $1,500 annual tax increase.
This topic creates an opportunity for President Biden to distinctly contrast his own narrow and strategic approach, which includes widespread investments into the affected industries through the Inflation Reduction Act and the Bipartisan Infrastructure Law against Trump’s unilateral sweeping tariff proposals that have long concerned economists for their potential harm to the U.S. economy.
Infrastructure
If President Biden wants to tout his first term in office as a success, he needs to highlight the progress made on infrastructure. To date, the Administration has announced more than $54 billion in Bipartisan Infrastructure Law funding for 56,000 projects across over 4,500 communities in all 50 states and DC. These projects have ranged from roads and bridges to environmental priorities such as zero-emission buses.
This is especially crucial given the fact that so far, voters have not given President Biden credit for his work on infrastructure. According to a poll from CNN, only 46 percent of Americans have heard a lot or some about the Bipartisan Infrastructure law, with similar numbers for his other three major spending bills. More tellingly, only 26 percent of voters said that President Biden’s federal spending on infrastructure had a major impact on their communities. To make matters worse, the number of people who credited Trump with doing more on infrastructure was roughly equal to the number of people crediting Biden for doing more.
The President needs to stress how successful his efforts have been so far and how they are already positively impacting many communities. He can stress specific projects in battleground states, as he has attempted to do previously. More importantly, he should draw a contrast between his work on infrastructure and that of Trump, whose work on the issue amounted to an “infrastructure week” that never materialized. Trump will undoubtedly try to paint Biden’s work on infrastructure as “wasteful spending,” especially attacking his investment in climate change priorities such as clean energy and climate resilience. Biden can counter that such spending is not wasteful, as investing in climate change priorities is investing in America’s future and mitigating potential future harms. Biden can also point out that his infrastructure spending, including on climate change priorities, has already created hundreds of thousands of jobs according to estimates.
Promoting Competition, Holding Corporations Accountable
The Biden administration has placed significant focus on reining in corporate power that has concentrated markets across the economy, leading to less competition and lower wages for workers, higher prices for consumers, less innovation, and an unfair playing field for small businesses.
Months into his first term, Biden called for a whole of government approach to promoting competition in the American economy and directed over a dozen agencies to enforce existing antitrust laws and implement initiatives to address consolidation. Agencies have since responded to the call. The Federal Trade Commission (FTC) has moved to ban noncompete clauses in employment contracts which the agency estimates will increase earnings for the average worker by $524 or more and lead to more than 8,500 new startups per year.
The FTC and Department of Justice (DOJ) have also investigated and brought enforcement action against some of the largest, most powerful companies from tech to agriculture. These cases will address harmful mergers and acquisitions throughout the economy.
Biden should highlight the tangible impact these agency actions will have on Americans and lift up his leadership in holding corporations accountable.
Social Security and Medicare
Social Security and Medicare, two of the government’s most popular and effective programs, offer a critical point of contrast between the candidates.
While both President Biden and Donald Trump have vowed to protect the programs from cuts recently, Trump is perhaps more vulnerable on this issue than Biden. In an interview with CNBC a few months ago, Trump stated “There is a lot you can do in terms of entitlements, in terms of cutting and in terms of also the theft and the bad management of entitlements,” triggering fears that Trump may actually be open to cuts if elected to another term.
President Biden proposed a four-point plan for Social Security reform last election cycle, which would involve:
- reinstating the 12.4 percent payroll tax on income greater than $400,000 (currently, there is no Social Security payroll tax for income over 168,600),
- changing the measure used to calculate cost-of-living adjustments from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Consumer Price Index for the Elderly (CPI-E),
- raising the special minimum benefit for lifetime low-earning workers to 125 percent of the federal poverty level, and
- lifting the primary insurance amount for higher-aged beneficiaries.
Biden has not updated specific plans for protecting and expanding Social Security since releasing this proposal. The debate offers an opportunity to fill in the blanks about his plans for Social Security and Medicare reform, solutions that would certainly play well with voters. Biden already has a detailed plan for Medicare reform to lean on in the debate, which would extend “the life of the Medicare HI trust fund indefinitely” while lowering costs for beneficiaries.
Highlighting these proposals and making a promise to tackle them during his next term would allow Biden to build contrast with Trump, who is unlikely to get into detailed plans of his own, instead sticking to a laissez-faire message. Trump’s track record on entitlements can be used to show voters he would stay away from tangible policy action if reelected, kicking the can further down the road and making necessary interventions more difficult and painful.