Whoever wins the White House in November will likely face the Herculean task of cleaning up America’s economic, political and social mess accumulated over decades and reaching its peak in Donald Trump’s presidency.
The US president’s trade and technology wars, particularly those against China, damaged the economy more than Trump is willing to admit. Trump poisoned the political atmosphere, using “fake news” to attack opponents, leading to extremism on both ends of the spectrum. Using racialized language to defend his ill-advised domestic policies created a divided America.
The difficulty in reversing America’s economic slide is the lack of muscular fiscal and monetary policy toolkits. According to US-based consultancy Trading Economics, the 2019 public-debt-to-GDP ratio reached almost 107%, the second-highest among developed countries, and behind only Japan at 237%. Key interest rates were set at between 0% and 0.25%.
The problem with a high debt-to-GDP ratio is there is little room to mount effective stimulus packages for economic recovery. Borrowing in the open market requires the government to pay higher interest rates associated with high debt ratios.
Resorting to quantitative easing (QE), the Federal Reserve printing money to buy Treasuries dilutes the value of the greenback, raising concern over its reserve currency status and possibly leading to currency wars.
Furthermore, the effectiveness of QE in spurring economic growth is questionable at best. For example, the trillions of dollars the Fed printed and the government spent had little impact. Unemployment remained high, and at the last count more than 27 million Americans were out of work. The economy is expected to contract by as much as 8% in 2020.
While rises in the stock market have benefited the wealthy top 1%, the majority of Americans are living from one paycheck to the next. Indeed, almost half of the population cannot finance an unexpected expenditure of $400. The numbers of impoverished and homeless people are also on the rise.
Further exacerbating the economic woes is the strong military-industrial complex lobby group, demanding and receiving huge military budgets, forcing the government to spend less on socio-economic enhancing programs such as education, health care, poverty eradication and infrastructure repair or upgrade. The “mismatched” budget erodes the health and quality of the labor force, thus undermining US competitiveness.
However, changing the budget process would be difficult because of the country’s deeply entrenched political culture of protecting the interests of the well-organized few at the expense of the majority.
Every administration and Congress has talked about increasing spending on education, health care and other social programs, but it was just that, talk. This is because politicians, including Trump, accepted millions of dollars in campaign donations from interest groups such as the military-industrial complex and did their bidding.
Money politics is unlikely to go away anytime soon because elections are big business, requiring significant amounts of money for advertising politicians’ platforms and mudslinging against their opponents. Because they need money, politicians are unlikely to kill the goose that laid the golden egg and will therefore continue to protect and promote large donors’ interests.
On the political front, the US has never been as divided as it has become under President Trump, bringing out extremism on both ends of the spectrum. His “Make American Great Again” slogan has brought out far-right groups in droves, supporting his anti-immigration policies and defending racially charged comments.
For example, the Proud Boys and other far-right white supremacist groups could use violence to protest if Joe Biden wins the election, particularly if his victory is the result of mail-in ballots. Trump has already told the country that mail-in ballots are subject to cheating and therefore he might not concede, and indeed telling the Proud Boys to “stand back and stand by,” presumably to fight for him to remain in power.
But if Trump wins re-election, far-left groups such as the Antifa movement could be enlarged and become more proactive, staging protests against Trump’s policies. If the president follows through with his anti-abortion policy, for example, vast numbers of Americans will hold protests to defend women’s right to choose.
Acute partisan politics has resulted in a do-nothing Congress where Democrat and Republican leaders disagree on almost everything from health care to Covid-19 recovery packages. This is unlikely to change.
The political divide could spill over to the social realm, pitting Americans against one another on racial or ideological grounds, just to name two issues. A Trump presidency would unlikely suppress police brutality against blacks or other people of color, leading to a pushback from the Black Lives Matter movement and the creation of more black militia groups.
A Biden victory, on the other hand, would reverse some of Trump’s racist policies, angering far-right groups. White supremacists, for example, would likely hold protests against what they refer to as the “selling out of America.”
Yes, whoever wins the presidency will encounter difficulties in addressing the mess that was in making for years, but exacerbated during the Trump administration.
Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.