Joe Biden's ten political priorities

On January 20, 2021, Joseph Robinette Biden was sworn in as the 46th President of the United States. In terms of policy direction, this shift may be somewhat less dramatic than after the Obama presidency, but like Trump, the Biden administration will act just as swiftly to overrule its predecessor's decision. In the context of an extremely divided America, this means that when one side gains power, it seeks to counteract the effects of the other side's policies. Biden announced that he would issue a series of executive regulations without delay, but this article discusses ten major policy areas for the new administration - five for home affairs, five for foreign affairs.

Report prepared by a team of analysts Saxo Bank - check out more.

Biden's national policy

# 1. Fighting Covid: the task from day one

Biden's most important task since what he calls "day one" is tackling the Covid-19 crisis; has long called for 100 days of face mask restrictions to allow time to vaccinate to prevent new, dangerous strains of the virus, lower mortality, and reduce the overall burden on US hospitals. Biden is likely to exert pressure at the federal level to establish a nationwide network of immunization centers in agreement with state authorities. Providing citizens with fair and quick access to the vaccine will be crucial to gaining popular support after the first six months of the year. If these measures are successful, it could mean a weak first quarter and the beginning of the second, while there would be an economic recovery in the second half of the year. We even consider the possibility of a destabilizing "catastrophic boom" because both the reduction in demand due to the lockdowns and the savings as a result of the pandemic mass influx of fiscal funds into the economy led to a spike in activity and inflation. This would indicate a possible political error on the part Fed and the government due to the implementation of excessive fiscal stimulus, which may lead to an increase in volatility as they are likely to be withdrawn too early.

Such a scenario could lead to drastically different outcomes for our thematic equity baskets, as stocks related to our "misfortune index", including the energy, tourism and entertainment industries, will initially benefit, as will higher inflation-linked stocks, while at the same time risking big decline if inflation picks up too much later in the year.

# 2. Social stabilization takes the lead

Today's bail-out cycles have tended to be focused on the financial markets where pain is felt most quickly, and financial system stabilization is seen as a prerequisite. sine qua non stabilizing the economy. However, the Covid-related recession is different as inequalities are greater than ever, and the traditional political response focused on keeping the financial markets functioning has only worsened the situation, triggering a spate of small business failures and the loss of tens of millions of low-paid jobs, while fiscal stimulus they strengthened the successes of internet giants, and perhaps supported the Chinese economy on a par with the US, given the demand for imported goods. This time stabilizing the economy will mean stabilizing society to prevent what is now known as an armed uprising - what it might look like we saw both in 2020 and during the Capitol riots two weeks ago.

In this context, the Biden administration will primarily focus on providing a safety net for those most at risk, preventing evictions, increasing the minimum wage, increasing coverage and lowering costs. A rapid increase in the minimum wage will inevitably lead to the disappearance of some low-wage occupations, which will require more support for the unemployed - so there may potentially be a continuation of what is de facto introducing an unconditional basic income via aid checks. After the pandemic is over, the continuation of the UCI policy may be hampered by Republican resistance, but there is no longer any party of "fiscal responsibility" and there will be no turn to austerity, as was the case after the 2008-2009 crisis. What does it mean? Fiscal deficits caused by a policy similar to Modern Monetary Theory (MMT) will remain at their current level until they are reduced by inflation. Higher wages, especially for those who spend all their earnings, put pressure on inflation and margins on companies unable to raise prices as costs increase. The Biden administration can find popular support for major infrastructure projects, which are arguably the most productive way to use fiscal stimulus, particularly if investment would improve the conditions of the most disadvantaged communities in American cities large and small. In this context, attention should be paid to the extent of the serious efforts to relocate production back to the US territory.

Social Media and Elections - After the 2020 elections, it is clearer than ever that the United States needs to improve its electoral infrastructure, covering everything from multiple voting methods to vote counting. Americans cannot afford a repeat of the 2020 election disaster, which was noticed too late given Biden's margin of victory, so they must ensure that on election night 2022 the result is announced quickly and transparently. Hopefully the United States can achieve this for the next elections and in 2024, perhaps through blockchain technology and other solutions to ensure a faster rate of vote count and avoid the flood of conspiracy theories on social media.

# 3. The climate agenda: small steps

Even though the climate was high on the agenda during the election campaign, in particular to please the most progressive wing of the Democratic Party, at least 2021 will be marked by big words rather than substantial spending. The concept of a $ 7 trillion Green Technology Infrastructure outlined in the campaign will not be adopted by a heavily divided Congress. However, expenditure on ecology will be included in the program, will be implemented from the state budget, only contributing to increasing the risk of inflation, both by limiting investments in cheaper energy from fossil fuels and due to the high costs of building green energy infrastructure. However, widespread opposition to the implementation of the Green Agenda in 2022 is to be expected if - which is very likely - the underinvestment of black energy (fossil fuels) will result in a sharp rise in prices for consumers, the vast majority of whom will continue to use gasoline-powered cars. The psychological impact of retail gasoline prices should never be ignored.

In the longer term, we hope that some energy expenditure will be redirected to next-generation nuclear power, both for new reactors and for basic research and projects to demonstrate nuclear fusion energy. In summary, alternative energy sources are not able to replace energy from fossil fuels in a systemic perspective, because energy production is too scattered and only nuclear energy can be a reliable substitute if we want to maintain a standard of living similar to the present one and the related energy intensity of the modern economy.

# 4. Giant internet monopolies: a regulatory framework for FAANG?

IT monopolies, from Facebook i Google po Amazon, found themselves on the radar of regulators before the Covid-19 pandemic. And then there was a pandemic response that not only did not hold back their business, but actually provided a turbo boost for their share prices due to increased valuation multipliers as interest rate cuts and the fact that lockdowns triggered a boom in business and online shopping as a result. closing and restricting the activities of brick and mortar stores, restaurants and entertainment venues. 

Monopolies extract too much extra profit from the economy, far exceeding the possible productivity offered in return. In 2021, we are already dealing with monstrous global giants. Both American political parties are becoming more and more aware of this fact and are ready to take steps to remedy it. In 2020, a bilateral commission in Congress made significant findings shedding negative light on major IT companies, while the US Federal Trade Commission and many state attorneys general had already opened a case against Facebook. In 2021, U.S. regulators will finally find out that these monopolists are threatening the economy, other businesses, and even social stabilization. The regulation of content, division and exclusion of intermediation in relation to the use of user data may be tightened. With a handful of top companies responsible for most of the capitalization growth in the US stock market in recent years, the implications for US investment will be enormous.

# 5. Taxation: a shift in time

Due to the need to respond to the pandemic and the coronavirus, the tax policy issue will take a further position at least until the end of 2021, despite the fact that during the campaign period, Biden announced the withdrawal of some of Trump's tax cuts for American entrepreneurs and other tax reforms, stipulating that only the upper 1% of earners. One of the underestimated aspects of Trump's tax reform is the fact that it has sharply increased the taxation of the highest earners in the regions - mostly Democrat voting states on both coasts - with the highest state and local taxes because the thresholds for write-offs have been lowered sharply. It was a brutal party game. If Biden is unable to reverse these tax regulations, and then add more federal taxes to state and local taxes, cities and coastal states could turn into ghost towns for the elite, further lowering local tax bases and driving underinvested local the public sector in a debt spiral.

Biden's foreign policy

While presidents often pursue a policy strongly focused on home affairs, the nature of the president's executive power means that it does not have much room for maneuver in implementing domestic policies without strong control from Congress, which exercises "power over the purse." For example, six of the eight years in Obama's presidency have passed without any action on the domestic front, and Biden has only a small margin of control over Congress. However, in the context of foreign policy, US presidents have broad freedom of action, and Biden will give US foreign relations a distinct new style, even if certain trends from the Trump presidency are maintained, particularly with regard to China. These are the five main areas of foreign policy.

# 6. Relations with China: Changing Style instead of Relationship Essence

Both American political parties are increasingly hostile to China, and Biden may withdraw from the few (if any) actions initiated by Trump against the Middle Kingdom - from banning the sale of technology in the United States to the Chinese telecommunications equipment manufacturer Huawei and calling allies foreign companies to take similar steps, to measures to limit the funding of Chinese companies listed in the United States due to auditing standards and alleged links with the military industry. 

Naturally, Biden will adopt a completely different style of communication with China: do not expect sharp tweets that threaten to impose unexpected tariffs, or expressions of Biden's special sympathy for Xi Jinping. There will be a rather slow exacerbation of actions similar to those already taken, which will further deepen the divisions between these countries and send a clear signal to American companies that they will need to look for alternative sources of production outside the Middle Kingdom. This will inevitably lead to competition for influence between trading partners at the world level, in a worst-case scenario causing a slow plunge into a sort of global financial and trade cold war, obviously - hopefully - devoid of brutal proxy wars in the style of the previous Cold War but pointing to the fragmentation of the world monetary system and the global economy as such. Whether and to what extent the United States is able to persuade its major trading partners and traditional allies in Asia and Europe to adopt an aggressive stance against China will be crucial during Biden's first two years as presidency.

# 7. Taiwan: the pillar of world technology

Taiwan is a global economic center of gravity because, according to estimates by some industries, it is the only country capable of mass production of the most advanced microprocessors, it also accounts for half of the world's production of semiconductors and as much as 90% of the production of the most advanced microprocessors. It is also a geopolitical center of gravity in the context of the continued struggle for technological dominance between Washington and Beijing, after the United States took steps to prevent certain Chinese companies, in particular Huawei, from supplying microprocessors containing American technology, even if they were manufactured for Taiwan or any other country.

How will China cope with this challenge, when it has so far failed to build its own factories and its key companies will depend on Taiwanese production, regardless of access to American technology, for at least the next two years? Any disruptions in supply in Taiwan, for whatever reason, will be particularly problematic for the tech industry and almost every aspect of the economy if that golden goose is prevented from laying golden eggs. Both geopolitically and economically, Taiwan is crucial.

# 8. Russia: turning a blind eye? 

Despite numerous mentions in recent years of Trump-Putin flirting, the Trump administration has taken a relatively tough stance on Moscow, notably with regard to imposing sanctions, and has even taken steps against the project of the Russian-German Nordstream 2 gas pipeline to supply Russian gas directly to Germany, bypassing Ukraine. However, Russia may find itself under new pressure from the Biden administration, partly because Democrats continue to believe that Moscow was heavily involved in disinformation and disinformation during the 2016 elections, and possibly also in the latest cyberattack blamed on Russia. service. The cooling off of relations may deepen and make it even more difficult for Russia to access the dollar-based financial system and attract foreign investment. This may adversely affect the ruble exchange rate and Russian assets. More importantly, however, given Russia's dependence on exports to Europe, the Russian issue may prove to be the main test of the strength of traditional US-European alliances, as well as the EU's own consequences in creating a euro-based financial system that is robust enough to do so. to be able to function independently.

# 9. Middle East: no good choice

We are unable (nor do we want to) to forecast specific results, but the Middle East has traditionally been a cauldron of dangerous problems, and this danger is exacerbated by the uncertain food availability in parts of the region at a time of soaring prices. Many people blame the Arab Spring and even the civil war in Syria for destabilizing access to food; in the case of Syria, there is also a drought. The pressure to move away from fossil fuels in developed countries may increase the risks as gas and oil exports are the economic backbone of the region. Biden's adoption of a less aggressive stance on Iran could also create tension in the region, and China's increasing dependence on imported oil from the Middle East compared to the United States means that China's involvement in the region will inevitably increase, given that Chinese oil imports have more than doubled in the last 10 years. China is currently the largest importer of crude oil.

Another key regional player is Turkey, which is playing on multiple fronts, and President Biden is unlikely to prove to be as much of an ally of President Erdogan as Trump, after Ankara buys a missile defense system from Russia. Will Turkey be able to retain nominal membership in NATO and will the Biden administration seek to exert further pressure on it in the form of sanctions?

# 10. Europe and multilateral institutions: big words at best 

The Trump presidency posed a great problem for the EU because it was marked by the greatest weakening of diplomatic relations between the United States and its major allies since World War II. Throughout Trump's four years in office, Europe felt isolated and even feared for its security over Trump's threats to withdraw military protection and loosen NATO commitments, not to mention the potential financial impact of Washington's protectionist trade policy. What changes will happen during Biden's term of office? At the beginning, the administration will most likely take its time to implement the new protectionist trade policy, and will say a lot about traditionally friendly relations, which will provide short-term relief. There are, however, many areas in which the United States and the European Union can take opposing sides, from the aforementioned policy towards Russia to whether the EU will be willing to take a stance on the deepening Washington-Beijing rivalry. Moreover, the average, increasingly self-directed American voter does not care about Europe.

Biden will also be willing to normalize the involvement of the United States in multilateral institutions such as the United Nations or the WHO and initiatives related to the international fight against climate change. These institutions, however, are not very popular - in particular, the WHO and its image catastrophe related to postponing the declaration of the Covid pandemic - and activities in this area may also turn out to be surprisingly limited. Economic populism is to be expected to increase, which may pose a threat to any non-nationalist, "globalist" political initiative. Biden's presidency can show that the populist left-wing agenda can be as much a protectionist American agenda as a right-wing populism. For example, the climate agenda could be used to sanction Brazil for destroying equatorial forests. Left-wing populism may also deepen the divide between Beijing and Washington due to the left's criticism of China regarding human rights and the country's status as the world's largest emitter of CO2 due to an intense coal economy.