Biden’s Economic Revival Plan

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IASbhai Daily Editorial Hunt | 12th Nov 2020

“Just know, when you truly want success, you’ll never give up on it. No matter how bad the situation may get.” – Unknown

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020-21.

EDITORIAL HUNT #237 :“Biden’s Economic Revival Plan 

Biden's Economic Revival Plan

Sukumar Muralidharan
Biden’s Economic Revival Plan

Sukumar Muralidharan teaches at the school of journalism, O.P. Jindal Global University, Sonipat

      HEADLINES:

Trumpism still remains unvanquished

      CENTRAL THEME:

The U.S. President-elect has vowed to rebuild the middle class, but will have a hard time finding the middle ground

SYLLABUS COVERED: GS 2 : 3 : IR : Economy

      MAINS QUESTION:

Critically examine the America First Policy and the recession due to ongoing Pandemic. -(GS 2,3)

      LEARNING: 

  • Inequality and the Middle Class
  • Tax code changes by Trumps Administration
  • Redistribution and Polity
  • Obama’s comeback
  • Way Forward

      INTRODUCTION: 

  • REBUILD THE MIDDLE CLASS : In his first speech after elections, Joseph R. Biden promised to rebuild the middle class as the “backbone of the nation”.

A “middle class” presupposes a political centre, a vantage point from which policies could be determined to secure the greatest good to the greatest number.

  • RESTORING EQUITY : Restoring a semblance of equity will be harder, when the system has drifted far from that ideal and the drivers of inequality are deeply rooted.
  • ECONOMIC SLOWDOWN : Trump’s administration saw, a bit of hyperbole rested on the thin foundation of the stock market.
  • AMERICA FIRST POLICY : Other boasts, such as a massive stimulus to U.S. manufacturing output, refuse to die though long since proven hollow.

      BODY: 

EFFECTS OF TAX CODE CHANGES

  • TRUMP’S SIGNATURE POLICY : The Tax Cuts and Jobs Act of 2017, raised exemption limits on estate duty and reserved many other favours for high-income individuals and corporations.
  • MIDDLE CLASS CONCESSIONS : The few concessions to the middle class and low-income earners, were largely neutralised by lower allowances and deductions.
  • PRICE RISE : The tax cuts sparked a flurry of share buybacks by corporate beneficiaries, sending prices soaring.

Apple’s market valuation doubled in just two years, hitting a stratospheric $2 trillion amidst the pandemic gloom.

  • A CASE OF RECESSION :  Today’s ratio of share prices to earnings stands near the levels touched between 2007 and 2008, just ahead of the abrupt collapse heralded by the global meltdown.

A REDISTRIBUTION AND POLITICS

PREVIOUS RECESSION

  • VOLCKER SHOCK : The 1980s began under the shadow of the “Volcker shock”, an overnight increase in interest rates that pushed the U.S. into recession.

Events on the stock markets also foreshadowed much that was to come, with the excesses of “junk bonds” causing a buoyancy in excess of anything warranted by the real economy. 

  • EQUILIBRIUM THEORY : High interest rates attracted large inflows of foreign capital, sustaining and causing the enormous U.S. external deficit in a process of cumulative causation quite unlike anything foreseen by “equilibrium theory”.

ONE BUBBLE TO ANOTHER 

  • BARACK OBAMA’S ADMINISTRATION : He brought conventional Keynesian remedies back, but the massive rescue package he shepherded was paid out to the bankers who brought on the crisis.
  • EQUITABLE TAXATION : He did return to a marginally more equitable taxation regime, but his legacy finally was a more rapid growth of inequality, measured by the Gini coefficient, than during prior Republican tenures .

      IASbhai Windup: 

TRUMP AND TROUBLES

  • GROWING DEBT : Both inequality and household debt have continued growing under Mr. Trump. Even before the novel coronavirus pandemic.
  • FINANCIAL SERVICES : Credit card and automobile loan delinquencies were showing a troubling upward trend.
  • ASSET PRICES : Increasing asset prices in the context are a source of solace for households struggling to get by.
  • MIDDLE CLASS ANXIETY : This could be measured in direct proportion to the size of the gap between household assets and liabilities.

And when none of the political choices on offer has credible proposals that assuage these anxieties, they tend to be transformed into cultural and identity wars.
 

He may have lost, but the 71 million votes he garnered — the most for any candidate, winning or losing, other than the person he actually lost to — shows that Trumpism still remains unvanquished.

       SOURCES:   THE HINDU EDITORIAL HUNT | Biden’s Economic Revival Plan 

TRENDING NOW : Important The Hindu Editorials 

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