Biden: Trump Tax Cuts a 'Disaster for the Middle Class’

Biden: Trump Tax Cuts a 'Disaster for the Middle Class’

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Plus - the rising tide of health care costs
Friday, December 6, 2019

Biden: Trump Tax Cuts ‘a Disaster for the Middle Class’

Joe Biden has been criticized by his fellow Democrats for insisting that as president he would be able to work with the Republican Party – the same party that rejected much of the Democratic economic agenda when Biden was vice president and has become even less cooperative under President Donald Trump.

Speaking to CNBC’s John Harwood in an interview released Friday, Biden said he thinks that although Trump is “ripping the soul out of this country,” voters and lawmakers will once again be interested in dealing with “things that they know we should be talking about” when he is gone – inspired in part by the negative impact Trump’s economic policies have had on large swaths of the electorate.

“[W]hat people have now seen is that his tax policy has been a disaster for the middle class, disaster for them, and that there is plenty of room to be able to do things that make a lot of sense,” Biden said. He added that “there’s overwhelming evidence now that the idea that the capital gains tax is promoting growth is just not the case,” and said he would raise the capital gains tax to roughly the same level as the income tax. “And you have a significant number of Republicans who aren’t multimillionaires thinking that makes a lot of sense,” he said.

Later in the interview, Biden said he had faith that voters will change their minds once they realize that Trump’s economic agenda isn’t providing the benefits it promised. “Once the carny show comes through — with the guy with the pea in the shell, three shells and there’s no pea under any shell — the second time it comes around, they figure it out,” he said.

Some of Biden's other comments on fiscal issues:

  • “I think we should have a financial transaction tax. But [in my tax plan] I focused on what I think I could get done, get done quickly and pay for everything I’m talking about. Because look, the president has increased with his profligate tax cut to the very wealthy the deficit by $1 trillion, $900 billion. It can’t be sustained. It can’t be sustained.”
  • On deficit spending: “It depends on the circumstance we find ourselves when we get elected. Look what we had to do [in 2009]. We, in order to be able to get out of the financial recession, which was the greatest recession, sort of a depression in American history, the president asked me to chair the recovery act, which had $900 billion in it, and we did it. Most even conservative economists acknowledged it probably saved us from a depression. But what we did at the same time was we were able to invest it in things that in fact grew the economy at the same time.”
  • Asked whether he still supported the balanced budget amendment he voted for in 1995, Biden said: “No, because we’re in a different place now. I hope it’s not true, but we’re likely to inherit a recession, at least a significant economic slowdown.”

Investors Eye Volatility from ‘Fiscal Dysfunction’

Reviewing its outlook for 2020, the investment team at New York fund manager Neuberger Berman recently discussed the economic risks associated with “fiscal dysfunction” – the government’s inability to create regulatory, spending and tax policies optimized for the current economic environment.

Joseph V. Amato, the firm’s chief investment officer for equities, said he’s ultimately optimistic for stocks in the coming year, but uncertainty around the presidential election and persistent fiscal dysfunction could create substantial volatility:

“We’ve all seen the data showing that a recession has been much more likely in the 12 months following a U.S. presidential election than it has been in a typical year. That correlation must reflect the business uncertainty around tax and regulation that an election throws up: investment gets delayed, which shows up as lower growth 12 months later. It just adds more to what I would call a general sense of ‘fiscal dysfunction.’ Central banks are being forced into increasingly extreme policy because governments are generally not getting things done and specifically not making the fiscal decisions appropriate to the current environment.”

Uncertainty could produce a 10% correction in 2020, Amato said, though in his view it would likely be short-lived. Erik L. Knutzen, the firm’s chief investment officer for multi-asset class, added that markets may have to wait a year to see if fiscal policymakers are capable of responding to a slowdown. “We may have to wait until 2021 or beyond for that, which could leave us caught in a void between monetary stimulus and fiscal stimulus during 2020.”

Read the Neuberger Berman analysis for 2020 here.

The Rising Tide of Health Care Costs

We told you yesterday about new data from the Medicare actuaries showing health care spending in the U.S. hitting a record high last year, totaling $3.65 trillion overall, or more than $11,000 per person. A separate report from the Commonwealth Fund provides some context for the data, charting the growth in the amount Americans have to pay for premiums and deductibles, relative to incomes.

“For middle-income people with employer insurance, the combined cost of premium contributions and deductibles amounted to 11.5 percent of income in 2018, up from 7.8 percent in 2008,” the report says.

Rick Newman of Yahoo Finance points out that health care costs have been outrunning wage increases for some time, slowly but surely eating away at disposable income. “Health care costs aren’t drowning the family budget overnight,” he wrote. “Instead, they’re creeping upward like a spillover that seems harmless until everything starts to get wet.”

Analysis of the Day: The Health Care Maze

Elisabeth Rosenthal, an emergency room doctor turned journalist, says the American health care system is “rigged against patients” and “in need of dramatic overhaul.” Writing at Kaiser Health News, where she is the editor-in-chief, Rosenthal points the finger at the system’s complexity, which is driven in large part by the pursuit of profit:

“The current complexity is an outgrowth of countless decisions over the past 30 years, many of which sounded logical at the time but which grew out of financial considerations. All the players are effectively licensed to reach into our wallets when they can’t get the money they want from one another.

As prices spiraled upward, insurers (backed by economists) imposed copayments and coinsurance so patients would have ‘skin in the game,’ to encourage them to use health care more sparingly, more wisely. But with prices in medicine now so high, the skin-in-the-game theory now means many patients live with debilitating symptoms, delay needed treatment or don’t get treated at all. ...

In a world where everything is billable (and nothing is under warranty), and when part of the system is found to be broken, the answer has often been to add another layer of complexity rather than to remedy the underlying flaw.

We’ve turned somersaults not to do what almost every other developed country has done: restrain charges by setting prices or by large-scale national negotiations. We hope that by structuring incentives for providers and patients — with PPOs, HMOs, HSAs, FSAs, coinsurance, copayments, pre-authorization, drug tiering, PBMs and more — the market will respond.

And it does, but often not with cheaper, simpler health care.”

Read Rosenthal’s full analysis here.

Your Prize for Making It Through the Week

The year isn’t quite over yet, but the “best of” lists are already rolling in. One that caught our eye is the best photos of the year from the Associated Press.

Have a great day! Send your tips and feedback to Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes. And please tell your friends they can sign up here for their own copy of this newsletter.


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