by WorldTribune Staff, July 9, 2020
Doubting that American workers and investors can generate growth in a Joe Biden economy that would include a $4 trillion tax increase, Wall Street is further souring on the 77-year-old Democrat nominee, a report said.
“Investors who breathed a sigh of relief when Democratic voters decided not to march off the socialist cliff with Bernie Sanders are getting a disturbing new sell signal from presumptive presidential nominee Joe Biden. The former vice president is proposing new threats to economic growth,” James Freeman noted in a July 9 analysis for the Wall Street Journal.
Some in the financial district had been withholding judgment in the hope that a Biden presidency, which no doubt would raise taxes, increase spending, and impose a myriad of new regulations, would also reduce trade tensions and tariffs.
“It’s getting harder to cling to this belief,” Freeman wrote.
Citing a senior Biden campaign adviser, the Journal reported that Biden would not make a priority of entering new free-trade agreements or reviving the Trans-Pacific Partnership that President Barack Obama negotiated at the end of his term and that President Donald Trump pulled out of at the beginning of his.
Biden’s plan not only threatens more friction with foreign trade partners, but also directly imposes costs upon taxpayers.
According to the Journal report:
Before this week, Mr. Biden had proposed about $6.7 trillion in new spending over the next 10 years, according to Cornerstone Macro, an investment research firm, or about triple what Hillary Clinton had proposed in 2016. On Thursday, he will add $700 billion in spending to that, according to a senior adviser.
Investors have fared well in the Trump economy. The S&P 500 is up more than 45 percent since his election, “despite periods of sharp volatility, including one in recent months as the pandemic led to an enormous market sell-off, followed by a robust return on the back of giant helpings of government stimulus,” a New York Times report said.
The NY Times report on Tuesday noted that the anticipated silver lining to the Biden economic cloud was a possible reduction in the costs of Trump trade policy. “A Biden presidency would result in less trade tension with China, which would be a welcome relief for equity investors,” economists at BCA Research wrote.
“But that was Tuesday,” Freeman noted on Thursday. “Now the Biden plan is looking like all costs and no benefits for markets and taxpayers. Even before his new trade message, Biden was already threatening numerous policies bound to deter investment and growth.”
Dan Clifton of Strategas Research noted that Biden is proposing to raise the corporate tax rate from 21 to 28 percent and his proposed tax increases would raise the effective tax rate on dividends from 40 to 60 percent.
Clifton notes other disincentives to operating U.S. businesses: “Just the prospect of the Biden tax plan being implemented will encourage companies to consider the sale of their businesses. Under the Biden plan, the capital gains tax rate is nearly doubled from 20 percent to 39.6 percent. The after-tax rate of return on the sale of the business is much higher this year compared to next year if the tax plan is implemented.”