The Big Economic Shift: Candidate Former Vice President Joe Biden

Joe Biden comes into the election from the perspective of having been the 47^th vice president of the United States, in the Obama administration. Biden’s economic policies mirror many of the Obama administration’s policies. He has run for president twice before, in 1998 and 2008, and then became vice president from 2009-2017 under President Obama.  He graduated from Syracuse University College of Law with his Juris Doctor in 1968. Biden then worked as a public defender in Wilmington, and then at a law firm.  He then became the Senator for Delaware in 1973 and in doing so became the 6^th youngest senator in US history.  He was re-elected numerous times, in 1978, 1984, 1990, 1996, 2002, and 2008.  He was also the chairman of the Judiciary and Foreign Relations Committees during his career in the Senate. 

Biden has stated that he has, “the most progressive record of anybody running for the… anybody who would run.”  However, Biden also promises a return to “normalcy.” Biden has participated in two of the Democratic debates for president and has qualified for the next round by meeting the requirements of garnering contributions from over 130,000 individuals, coming from 400 unique donors in 20 or more states and reaching 2% in at least four DNC-approved polls.  According to Real Clear Politics, he is currently the top candidate in the national and Iowa polls.

Key takeaways:

1. Similar to the other top four 2020 Democratic contenders, Biden’s economic policies stand in sharp contrast to the Republican corporate and individual tax cuts along with regulatory reform policies under the Trump administration.
2. Biden is unique amongst the top 2020 Democratic candidates in that he does not advocate for the significant restructuring of large parts of the US economy.  While he does have detailed policies, his plans are mainly directed at reforming areas like the Affordable Care Act and criminal justice system, as well as shoring up the Social Security and Medicare/Medicaid programs.  However, Biden does propose significant changes for two areas: energy and the environment.
3. Similar to the other top four 2020 Democratic contenders, we should expect a short-term and long-term dramatic impact on companies and relevant sector values from his policies.  Unlike the other candidates, this impact is likely to be more narrowly focused on energy and the environment. 

Joe Biden has his website organized into 6 plans. Below are the listed plans from his website.

Latest Plans:

• Joe’s Plan for Strengthening America’s Commitment to Justice
• Joe’s Plan to Protect & Build on the Affordable Care Act
• Joe’s Plan for Older Americans
• Joe’s Plan for Rural America
• Joe’s Plan for a Clean Energy Revolution and Environmental Justice
• Joe’s Plan for Educators, Students, and our Future

Economy and Jobs

Like many of the 2020 Democratic candidates, Biden doesn’t have one specific place on his website for his plans on the economy or jobs.  This means we have to pull bits and pieces out of his other sections to provide a framework for this part of our article. Like our other articles, we’ll address his plans for healthcare, trade and energy below.

First, Biden believes the income gap between rich and poor is pulling the country apart.  In this vein, he has said that the tax code is “wildly skewed” toward “taking care of those at the very top.”  He notes that “it favors—overwhelmingly favors—investors over workers,” and that “it’s riddled with unproductive expenditures.”  Instead of this approach to tax policy, he has said that he is in favor of a pro-growth, progressive tax code. To achieve this, he would reverse President Trump’s Tax Cuts and Jobs Act and eliminate tax breaks that reward special interests.  As well, he plans to close the stepped-up basis loophole, which allows heirs to pay less tax on their inheritance. He would also remove the capital gains loophole for millionaires.

He would expand the Child Tax Credit.  He will also “call for widespread adoption of workplace savings plans and offer tax credits to small businesses.”  Biden would also expand the Earned Income Tax Credit to older workers and would implement legislation to protect older workers from being discriminated against in the workplace.

With regard to jobs and wages, Biden supports the $15 minimum wage.  He also states that “we should stop companies from classifying low wage workers as managers in order to avoid paying them overtime they’ve earned.”  He also wants to “stand up against wage suppression through non-compete clauses” and would strengthen unions. He also wants to ban non-compete clauses and increase wage transparency.

Biden advocates for free college, but his plan is only for 2-year community colleges.  He estimates this cost to be around $6 billion. He doesn’t have a plan for eliminating student debt at this time, but he has a plan to increase incomes for teachers with the aim of helping them to pay off their student loan debts.  He says he is committed to spending $100 billion to improve school infrastructure across the country and would also focus this investment in lower-income communities.

As part of his Plan for Rural America, he makes a number of proposals intended to support new and beginning farmers, as well as small farms.  First, he would expand the Obama administration’s microloan program for new farmers to $100,000 in maximum loans. He would also increase funding for the Department of Agriculture’s farm ownership and operating loans which are typically given to farmers who are just starting out.  He would also support the development of supply chains that would better allow farmers to negotiate their own prices and identify markets for specialty crops. Similar to other candidates, he would strengthen the enforcement of the Sherman and Clayton Antitrust Acts and the Packers and Stockyards Act to protect small and medium-size farmers and producers.  Another of Biden’s plan is to increase funding to the Sustainable Agriculture Research and Education Program and the National Institute of Food and Agriculture.

For small businesses in general he would increase access to credit for new and small businesses in small towns and rural areas by increasing funding for Community Development Financial Institutions (CDFIs) and the Rural Microentrepreneur Assistance Program.  Biden also proposes a White House “StrikeForce” to partner with poverty-stricken rural communities to help them access federal funds.

Lastly, he would reform occupational licensing.  This would remove licensing restrictions or reduce them on particular occupations such as nail salons, barbers and hair stylists.

Trade

Biden has a long history of supporting free trade agreements.  He voted for NAFTA and for the status of PNTR (permanent normal trade relations) with China that led to the accession of China into the WTO.  When he was Vice President, he lobbied Congress on behalf of President Obama to approve the Trans-Pacific Partnership (TPP). However, in August 2019, Biden said he would renegotiate TPP as a counterweight to China.

Biden believes that trade laws should be enforced to protect the competitiveness of American workers and promote an equal playing field.  He has also stated that international trade laws should be rewritten to “protect our workers, safeguard the environment, uphold labor standards and middle-class wages, foster innovation, and take on big global challenges like corporate concentration, corruption, and climate change.”

Under his Plan for Rural America he would also pursue a trade policy that supports American agriculture.  He has stated that he would “stand up to China by working with our allies to negotiate from the strongest possible position,” with a trade policy that “works for American farmers.” 

Biden proposes to make any future trade agreements with China on carbon mitigation dependent on China “eliminating unjustified export subsidies for coal and other high-emissions technologies.”  In addition, he would promote the export of American clean energy and clean energy technologies.

He would require the ensure the Overseas Private Investment Corporation (OPIC), the Export-Import Bank, and the new U.S. International Development Finance Corporation to “significantly reduce the carbon footprints of their portfolios.”

Energy and the Environment

Biden’s general stance on climate change and environmental issues is clear (he introduced the first-ever climate change bill in 1986).  He describes himself as a “climate pioneer”. He plans to basically implement portions of the Green New Deal proposed by Alexandria Ocasio-Cortez.  However, he has not explicitly endorsed the Green New Deal. He has estimated that his environment plans would create 10 million new jobs.

As part of his 2020 platform he has released a 22-page agenda to jump-start a “clean energy revolution” that focuses on fighting climate change and promoting green jobs.  One of the primary features is that under a Biden administration, the Paris Climate Agreement would be re-entered. Biden would also direct the EPA and the Justice Department to pursue climate-polluter cases to the fullest extent of the law.

Biden’s energy policies are informed by his environmental policies, as he heavily supports investment in renewable energy.  For instance, he proposes to put $1.7 trillion into clean energy spending over a decade. Biden also promised to invest $400 billion over 10 years specifically in clean energy research and development.  He would also end tax breaks for the fossil fuel industry to finance a clean energy spending plan.

His goal is for the US to have net-zero emissions by 2050.  On his first day in office, Biden pledges to issue executive orders on the following:  

• Requiring aggressive methane pollution limits for new and existing oil and gas operations.
• Using the Federal government procurement system—which spends $500 billion every year—to drive towards 100% clean energy and zero-emissions vehicles.
• Ensuring that all government installations, buildings, and facilities are more efficient and climate-ready, harnessing purchasing power and supply chains to drive innovation.
• Reducing greenhouse gas emissions from transportation—the fastest growing source of U.S. climate pollution—by preserving and re-implementing the existing Clean Air Act. To this end Biden would also promote rigorous new fuel economy standards aimed at ensuring 100% of new sales for light- and medium-duty vehicles are electric, as well as requiring annual improvements for heavy duty vehicles.
• Doubling down on the liquid fuels of the future, which make agriculture a key part of the solution to climate change.  Advanced biofuels are now closer than ever, and the first plants for biofuels can contribute towards creating jobs and new solutions to reduce emissions in planes, ocean-going vessels, and more.
• Saving consumers money and reduce emissions through new, aggressive appliance- and building-efficiency standards.
• Committing to a plan that every federal infrastructure investment should reduce climate pollution and require any federal permitting decision to consider the effects of greenhouse gas emissions and climate change.
• Requiring public companies to disclose climate risks and the greenhouse gas emissions in their operations and supply chains.
• Protecting biodiversity, slowing extinction rates and helping leverage natural climate solutions by conserving 30% of America’s lands and waters by 2030.
• Protecting America’s natural treasures by permanently protecting the Arctic National Wildlife Refuge and other federal lands and waters, establishing national parks and monuments, banning new oil and gas permitting on public lands and waters, modifying royalties to account for climate costs, and establishing targeted programs to enhance reforestation and develop renewables on federal lands and waters with the goal of doubling offshore wind by 2030.

His energy and environment plan also includes:

• more than 500,000 new public charging stations for electric cars nationwide;
• incentivizing innovation with sustainable fuels for aircrafts to reduce airline emissions; and 
• improving commuter and freight train travel for greater and more efficient access to the southern and western parts of the country.

Biden wants to create a new government agency similar to DARPA (Defense Advanced Research Projects Agency) called ARPA-C, a hybrid agency focused on climate.  Its purpose is to target affordable, game-changing technologies to help America achieve 100% clean energy with a focus on the following:

• grid-scale storage at one-tenth the cost of lithium-ion batteries;
• small modular nuclear reactors at half the construction cost of today’s reactors;
• refrigeration and air conditioning using refrigerants with no global warming potential;
• zero-net energy buildings at zero-net cost;
• using renewables to produce carbon-free hydrogen at the same cost as that from shale gas;
• decarbonizing industrial heat needed to make steel, concrete, and chemicals and reimagining carbon-neutral construction materials;
• decarbonizing the food and agriculture sector, and leveraging agriculture to remove carbon dioxide from the air and store it in the ground; and
• capturing carbon dioxide from power plant exhausts followed by sequestering it deep underground or using it to make alternative products. 

For consumers, Biden also focuses on the issue of clean drinking water, proposing better water testing policies across the country.  One of his approaches is to improve manufacturing standards for appliances and home-building. In this way, he hopes to save consumers money and reduce emissions.  He will also attempt to “put in place a national program to target a package of affordable energy efficiency retrofits in American homes.”  A further goal is to have low-income housing made more efficient, and for the US Department of Energy to increase their efforts to add new efficiency standards.

Another proposal is to restore the full electric vehicle tax credit.  He will also ensure that the tax is designed to benefit middle class consumers and to incentivize the purchase of American-made vehicles.  Biden plans to work with the insurance industry to identify ways to lower property insurance premiums for homeowners and communities who invest in resilience.

Biden also plans to introduce a “national strategy to develop a low-carbon manufacturing sector in every state … ensuring businesses and workers have access to new technologies and skills, with a major focus on helping small and large manufacturers upgrade their capabilities to have both competitive and low-carbon futures.”  Allocated tax credits and subsidies will be available for businesses to upgrade equipment and processes, invest in expanded or new factories, and deploy low-carbon technologies, as long as all stakeholders are part of the process of determining a bottom-line win for jobs, workers, clean energy, and long-term community investment.

Lastly, Biden would demand a worldwide ban on fossil-fuel subsidies.  Biden would reform the IMF and development bank standards on debt repayment so that they take any unsustainable climate and debt costs into account when determining “who gets paid under international debt forbearance.” Projects with higher climate costs would go to the end of the list, making them riskier to take on.

Healthcare

Biden’s general approach is that he is in support of the Affordable Care Act (ACA), as he thinks that “healthcare is a right for all and not a privilege for the few.”  He said that he will do everything in his power to “protect and build on it”. Biden would expand the ACA’s Medicaid expansion to protect low-income adults, with an option that has no premiums.  Biden also supports a new choice for ACA, which is a public health insurance option like Medicare. According to the plan, everyone (no matter how they are covered, e.g. through employers, individual purchases, or no coverage) would have an option to purchase public health insurance.  Biden would ensure that “no family buying insurance on the individual marketplace, regardless of income, will have to spend more than 8.5% of their income on health insurance.”

Overall, his plan is to generally expand on Obamacare by preserving the most popular parts of it and include a new government-run public insurance option.  His policy would also allow Medicare to directly negotiate drug prices and allow prescription medication to be imported from abroad.  It would also extend tax credits to support Americans to buy lower-priced health insurance. Everyone on the individual insurance market would also be able to qualify for premium tax credits. 

Biden would support the elimination of payment cuts and additional payments for rural hospitals as detailed in the bipartisan Save Rural Hospitals Act.  He would also double the federal investment in community health centers.

He proposes to implement his plan by reversing the tax cuts from the Trump administration in the Tax Cuts and Jobs Act. 

Summary

Former Vice President Joe Biden promises a return to “normalcy” while also stating he has the most progressive record of anybody running.  While this may seem counterintuitive, his policies do reflect this attempt to be progressive without completely restructuring the US economy.  Biden’s governing experience reflects this somewhat more balanced approach to policy and towards reforming many key industries versus completely setting new rules.

Biden’s policy proposals have been less detailed (including information on how he plans to fund them) when compared to Senator Elizabeth Warren and Senator Bernie Sanders, which makes it hard to see what trade-offs and compromises he is making to fund his plans. Other than the Tax Cuts and Jobs Act, what changes will he make to increase the budget for his plans?  However, it is also important to note that his spending is significantly below the levels of both Warren and Sanders.  

On the positive side, his plan to expand the EITC stands on a solid foundation as one of the best government spending plans, as it encourages single people and primary earners in married couples to work.  According to the Tax Policy Center, “If the EITC were treated like earnings, it would have been the single most effective antipoverty program for working-age people, lifting about 5.8 million people out of poverty, including 3 million children (CBPP 2018).”

Furthermore, the creation of a single agency in charge of advanced research on energy with a goal of creating an energy grid using grid-scale storage at one-tenth the cost of lithium-ion batteries is an important focal point for solving the issue of carbon emissions.  As stated in our research on Sanders, we believe efforts to create efficient and grid-scale batteries for storing electricity is crucial, as it would accelerate the use of solar energy creation. 

Lastly, Biden’s proposals to put $1.7 trillion into clean energy and to invest $400 billion over 10 years in clean energy research and development are significant and will make a major impact on jobs and the economy.  His stated outcome of 10 million jobs would be an excellent outcome. Yet, there are trade-offs between the spending and the funding of these projects.  

On the negative side, removing the tax proposals under the Tax Cuts and Jobs Act of 2017 (TCJA) would likely create downside pressure in the equity markets and the economy.  As well, it would remove the TCJA incentives for capital expenditures for corporations to invest in the United States. It would also create competitive pressures on US companies to either relocate or to be purchased by foreign competitors due to lower corporate tax rates elsewhere.

Biden’s resetting of the energy sector to achieve environmental goals also carries risks.  By discouraging exploration for new fossil fuels, he runs the risk of creating higher energy prices for consumers.  Low- and middle-income consumers would likely bear a higher cost as a percentage of their income, when compared to upper-income consumers.  As well, any executive orders Biden issues on his first day in office on energy policies would risk being unwound by the next Republican president and may be subject to court challenges.

One of the areas in which his policies are mixed, is trade. Biden has been a free trader and supported NAFTA and TPP in the past.  However, he has said he would renegotiate the TPP to include higher standards for environment and labor. He would also do the same for any agreement with China. Naturally, candidates’ views can (and often do) change over time, but this uncertainty leaves it unclear how Biden would actually approach issues of trade in his administration.

Repeating what we previously concluded for the other candidates, Biden’s policies of addressing providing increased access to healthcare, improving Social Security and dealing with important environmental issues are critical for the long-run health of an economy and society.  With any intervention into business and the economy, it is a question of trade-offs: inefficiencies, higher taxes and higher costs via regulations versus better economic outcomes, better healthcare and better housing for underserved communities.