A Democratic White House and Republican Senate means the many regulations Joe Biden has promised will likely require centrist modifications before becoming law.
After a record-breaking and highly contentious election, Joe Biden is set to assume the role of the 46th of the United States. He ran on what some call “the most progressive Democratic platform in decades.” What attracted a historic amount of Americans to his ticket is the promise to prioritize Main Street over Wall Street. His plan, rooted in empowering the middle class, includes, among others, raising the corporate tax rate to 28% (up from President Trump’s 21%), decreasing the costs of prescription drugs, and supporting a generation burdened by student debt.
What pleases many working-class people is worrying the markets, though. Many of Joe Biden’s proposed policies, coupled with possible aggressive nation-wide shutdowns in an effort to reduce the spread of the novel Coronavirus, bode a slow economic recovery. The upcoming administration’s strategy will be to combat the virus as a means of laying the groundwork for a stronger economy down the road. Such a course of action, however, inevitably means that the economy will first get worse before it gets better.
The hopes and prayers of investors, however, were answered when it was made apparent that Republicans are set to retain control of the Senate. With this projection, attitudes in corporate America quickly shifted as it is therefore relatively certain what the next two years have in store politically: gridlock. A Democratic White House and Republican Senate mean the many regulations Joe Biden has promised will likely require centrist modifications before becoming law. However, given the extreme political divide present in Washington, any bipartisan cooperation at all may be a pipe dream. This is especially important in the age where many corporations are preparing for major stock repurchasing. Joe Biden has appealed to industry leaders during his campaign to instead invest their profits back into employee salaries to help combat the financial distresses faced by households across the nation instead of boosting their stock price. Furthermore, Senators such as Elizabeth Warren have been calling for SEC reform to outright forbid such activity in the markets for .
While many investors are wary of the President-elect’s policy proposals, they reportedly are eagerly awaiting the stability that will accompany a Biden administration. The days of fearing whether the market will go under after a single late-night tweet from the President are soon to be history and Wall Street, among many others, is happy to see them go. However, Biden’s character is not the only thing the markets are looking forward to. He has, on many occasions, stated that in order to kickstart an economic recovery major stimulus packages are needed. Many suspect that he will mimic the policies employed during the 2008 financial crisis during which he served as Vice President. Many argue that he was instrumental in passing major stimulus packages through a Republican-controlled Senate by leveraging the relationships he has cultivated over his six terms there. While today’s Senate is unlikely to yield in matters of increased taxation or drastic environmental regulation, a stimulus package, experts predict, may be something mutually beneficial for both the Executive and Congressional branches. After all, a historic fiscal policy plan was already passed only a few months ago despite a more conservative government.
Wall Street gaining big in these elections does not indicate that the average worker will be better off solely because stock indexes are climbing. However, due to the strong positive correlation between economic growth and developments in the financial system, for the first time in a while, we are seeing a sliver of hope. □
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