US Presidential Election 2024: Aside From Biden's Debate Debacle, Why Trump Is Favored

Recently, we discussed how the U.S. National Debt has forced presidential candidates to focus on tax revenue in this article. How exactly are the presidential candidates addressing this critical issue, and what's actually happening?

Recap on National Debt
The United States government debt has soared to unprecedented levels, now exceeding $34 trillion. This staggering figure surpasses the debt incurred during World War II, a time of immense military expenditure. Experts warn that if this trajectory continues, the debt could become unmanageable within the next two decades, potentially triggering a severe financial crisis in the world's largest economy.
Several critical factors contribute to this burgeoning debt. Key among these are sustained fiscal deficits driven by extensive government spending on entitlement programs such as Social Security, Medicare, and Medicaid. Additionally, economic stimulus measures enacted to counteract the impacts of the COVID-19 pandemic have significantly increased the national debt.
Rising interest rates pose a looming threat, as the cost of servicing the debt grows, consuming a larger portion of the federal budget. The Congressional Budget Office (CBO) projects that interest payments alone could surpass defense spending within the next decade. This fiscal strain could limit the government’s ability to invest in essential areas such as infrastructure, education, and healthcare, further hampering economic growth.
Political gridlock adds another layer of complexity to addressing the debt crisis. Partisan disagreements over tax policies, spending cuts, and entitlement reforms have stymied comprehensive solutions, leading to a cycle of short-term fixes and temporary relief measures. This lack of a long-term strategy exacerbates the uncertainty surrounding the nation’s fiscal health.

Biden vs. Trump: Tax Plans
When it comes to tax plans, the presidential candidates have adopted radically different proposals:

Biden:

• Raise corporate tax rate to 28%
• Increase top individual income tax rate to 39.6% on income above $400,000
• Extend expiring tax cuts for taxpayers making under $400,000
• Impose a “billionaire minimum income tax,” setting a 25% minimum tax rate on households worth more than $100 million

Trump:

• Lower the corporate income tax rate from 21% to as low as 15%
• Make the expiring estate tax cuts from the 2017 Tax Cuts and Jobs Act permanent
• Tax large private university endowments

The Caveat: Both Houses of Congress
However, there is a significant caveat that both presidential candidates must overcome. To implement their proposals, the winner of the presidential election will need both houses of Congress (the Senate and the House of Representatives) to be controlled by the same party as the president.
Here are the reasons why:

1. Legislative Agenda: When the president's party controls both houses, it becomes easier to pass legislation that aligns with the president's priorities. This alignment facilitates smoother cooperation between the executive and legislative branches, allowing for more efficient advancement of the president's policy agenda.
2. Confirmation of Appointments: The Senate is responsible for confirming the president's appointments to the federal judiciary, cabinet, and other key positions. A Senate controlled by the president's party is more likely to approve these appointments without significant delays or opposition.
3. Budget and Appropriations: Control of both houses makes it easier to pass budget resolutions and appropriation bills. This ensures that the government's funding aligns with the president's policy goals, reducing the risk of government shutdowns and budgetary conflicts.
4. Impeachment and Oversight: While impeachment proceedings start in the House, the trial is conducted in the Senate. Control of both houses by the president's party makes impeachment less likely and provides a buffer against aggressive oversight and investigations by the opposition party.
5. Policy Stability: Unified control can lead to more stable and coherent policy implementation. It reduces the likelihood of legislative gridlock, where different branches of government block each other's initiatives, leading to more predictable governance.
6. Political Capital: The perception of having a strong mandate from the electorate can empower the president and the ruling party to pursue more ambitious policies. This perception of strength can also be crucial in international negotiations and setting foreign policy.

Historically, presidents who have enjoyed unified government have been able to pass significant legislative achievements. For example, Franklin D. Roosevelt's New Deal, Lyndon B. Johnson's Great Society programs, and Barack Obama's Affordable Care Act were all passed when their respective parties controlled both houses of Congress.

Why the Execution of Both Parties' Proposals Is Uncertain

Currently, the Senate and House of Representatives are closely contested, with neither party having a definitive hold on either chamber. This political balance means that both parties face significant challenges in securing the control necessary to implement their tax plans fully.

Who Stands to Gain Given the Current State of Affairs?
In the current political climate, Trump appears to have an advantage. Historically, voters tend to favor tax cut policies over tax increases, which could work in Trump's favor given his proposals to reduce various taxes.
There are several reasons why voters might prefer tax cuts over tax hikes:

1. Economic Stimulus: Tax cuts can stimulate the economy by increasing disposable income for individuals and reducing costs for businesses. This can lead to higher consumer spending and increased investment by businesses, driving economic growth.
2. Corporate Tax Cuts and Trickle-Down Effects: Lowering the corporate tax rate can reduce the financial burden on businesses, allowing them to invest more in expansion, hiring, and innovation. Conversely, higher corporate taxes can lead to companies passing on the costs to consumers in the form of higher prices, contributing to inflation.
3. Inflation Concerns: Tax hikes, especially during times of economic uncertainty, can exacerbate inflationary pressures. When businesses face higher taxes, they may increase prices to maintain profit margins, leading to higher costs for goods and services. This inflation erodes purchasing power and can negatively impact the standard of living.
4. Economic Predictability: Tax cuts can create a more predictable and stable economic environment, encouraging businesses to plan for long-term growth. In contrast, frequent changes in tax policy and increases in tax rates can create uncertainty, hindering economic planning and investment.

Looking Ahead: Potential Impact of a Trump Election
If Trump is elected, we can expect significant changes in tax policies aimed at reducing the corporate tax rate and maintaining tax cuts from his previous administration. These changes could stimulate economic growth, attract investment, and potentially increase government revenue through broader economic activity. However, the long-term impact on the national debt and fiscal health remains a critical concern that will require careful management and bipartisan cooperation.
Trump's favorability in the election highlights the importance of tax policies in shaping voter preferences and the economic future of the United States. The unfolding political landscape will be crucial in determining the next steps in addressing the national debt crisis and ensuring sustainable economic growth.