President-Elect Joe Biden Presiding Over A Divided U.S. Government: Here’s How This Would Affect The Job Market
The Dow Jones Industrial Average, a bellwether for the stock market and health of the economy, skyrocketed over 1,000 points Monday morning. A combination of events, including Pfizer’s announcement that its “clinical trial showed that [its] vaccine candidate was more than 90% effective in preventing Covid-19 in participants,” a declared winner of the presidential election without civil unrest and President-elect Joe Biden’s warm and embracing acceptance speech calling for bringing Americans back together again, unleashed investor euphoria.
Leading up to the elections, there was a looming fear of people taking to the streets, destroying property and inciting violence, depending upon the outcome of the race. Although President Donald Trump alleges fraud in the voting process and vows to pursue legal recourse, Wall Street seems to believe that there won’t be sufficient evidence to overturn the election results.
It appears, for now, that the U.S. will have a divided government. The Senate will be led by Republican majority with a slight majority of Democrats in the House, along with a Democratic president in the White House. Historically, the stock market favors balanced powers of government. The theory is that gridlock is good for the economy and job market. There will be checks and balances in place, so that no one party can run roughshod over the other. It will force the Democrats and Republicans to collaborate together; otherwise, nothing can be accomplished. For example, many people were worried about Biden substantially raising taxes on both corporations and individuals. With no one party firmly in control, it would be hard to push through exorbitant tax hikes.
David Rosenberg, chief economist at Rosenberg Research, tweeted, “I am calling it the ‘Tails I win, Heads I Win’ market.”
This structure may force Biden to pick and choose his battles. If the “ blue wave “ that was predicted by the pollsters came to pass, Biden would preside over a Democrat-led Senate and Congress. This would have enabled him to swifty push through his agenda on healthcare and the environment. Instead, it’s likely that Biden will start focusing on matters that could win bipartisan support.
Biden is an old-school politician, known for cutting deals with people from across the aisle. He has worked with and kept collegial relations with the sitting Senate Majority Leader Mitch McConnell for a long time. Biden’s initial programs could be focused on Covid-19-related measures, a second stimulus package, enhanced unemployment benefits and a massive infrastructure program.
Biden, in his campaign, promised to build an economy based on green energy. He claimed that this initiative would create over 10 million well-paying jobs. This initiative may take a back seat, as a Republican-held Senate and Democratic congressmen, in districts that have oil and gas producers, may not go along with his program.
President-elect Biden’s large $700 billion “ Buy American “ legislation would appeal to both parties. His promise to push for manufacturing to return to the U.S. and buy American goods should resonate well with everyone-so will his proposed trillion-dollar program to upgrade the nation’s roads, bridges and highways. This could be a boon to all sorts of workers ranging the gamut-from blue-collar construction jobs to high-end engineering professionals.
To pay for these programs, Biden may be forced to raise taxes. On the campaign trail, he called for the elimination of tax loopholes and raising the taxes for people earning over $400,000. He also said that the corporate tax rate will be raised and he’ll increase taxes on securities capital gains and dividends for incomes above a certain amount. This may discourage discretionary spending and a retraction of starting new ventures, due to the perceived onerous tax rate.
Biden said that he will reenact the regulations Trump defanged under his administration. This could raise costs and inhibit business for companies in a number of sectors. It may be a big gain for people who work in the legal, compliance and regulatory professions.
A call for an increase in the federal minimum wage -from $7.25 to $15 an hour-could hurt big and small businesses alike, due to the extra costs.
Barring any major changes for the next couple of months, Biden will walk into the White House with an economy that’s improved since the early days of the pandemic and a recovering job market. October’s jobs report boasted a 638,000 gain in employment and the recovery of 12.1 million lost jobs.
It’s hoped that Americans will put their political differences aside and rally together to successfully make it through the other side of the coronavirus and start building a bright new future.
Originally published at https://www.forbes.com.