Joe Biden: a Big Supporter of Keynesian Economics

With the 2020 presidential election being about a year away from now, political parties and their presidential candidates are trying to increase their popularity before the election comes around. Some of the major presidential candidates from the Democratic Party include Michael Bennet, Joe Biden, Cory Booker, Bernie Sanders, and Andrew Yang. On the other hand, Donald Trump only has four competitors from the Republican Party: Roque De La Fuente, Mark Sanford, Bill Weld, and Joe Walsh. This essay will mainly focus on Joe Biden’s proposals along with a comparison to his opponents’ strategies and policies.

Joe Biden: A Strong Advocate for Keynesian Economics

First thing first, Joe Biden, former vice president during the Obama administration, believes that increasing the educated workforce will be beneficial to the economy. He proposed to make two-year community colleges free for qualified students as a way to raise GDP. If the quality of the workforce increases, the GDP will eventually increase due to higher efficiency and higher pay for their skills. Additionally, Biden believes that improving access to education can help close the income inequality gap, providing more equitable opportunities for all Americans.

Biden also believes that increasing the tax rate would be beneficial for the people. He wants to raise taxes and use that money to invest in the American healthcare system. From Joe Biden’s address to the World Economic Forum in Davos, Switzerland in 2017, he mentioned implementing a progressive, equitable tax system where everyone pays their fair share, meaning that taxpayers will pay their taxes based on their income (Biden, 2017). This is a very Keynesian point of view because Biden wants to raise taxes and use that money towards healthcare, which is a public service. In Keynesian economics, if taxes are used on public services, the aggregate expenditure would rise, which will lead to more jobs and household benefits. By definition, if taxes are raised to increase government expenditure on goods and services by the same amount, the economy will expand. This also means the production possibility frontier (PPF) curve will shift outwards.

Biden's Taxation Policies

As mentioned before, Joe Biden wants to raise taxes; he wants a “pro-growth” tax code. In the October Democratic Debate of 2019, Biden said he would raise the capital gains tax to the highest rate, of 39.5 percent (Biden, 2019). This means that millionaires would have to pay 39.5% of their income to taxes. This continues his Keynesian perspective; he wants to use the money to cover the tax loopholes so that things like Social Security and Medicare can be affordable. Previously, Joe Biden also used the current U.S. GDP growth rate to critique Trump, due to the fear of a recession as benefits from a previous tax cut fade away and the tariffs imposed on imports from China hurt the American manufacturers and farmers.

Contrast with Bill Weld's Views

In contrast to Joe Biden, Bill Weld from the Republican Party, who was also the Libertarian vice-presidential candidate, wants to cut taxes. In a recent Q&A at Dartmouth College, Weld talked about what he did when he was the governor of Massachusetts: he cut spending, cut taxes, and was ranked the most fiscally conservative governor in the United States by The Wall Street Journal and the Cato Institute (Weld, 2019). He has a Classical view on this topic, believing that the increase in taxes will shift the supply of labor downward, and the PPF curve will also shift in. Weld also thinks that nobody in Washington is looking out for the taxpayer. The Democrats want to increase social spending, the Republicans want to increase military spending, and they compromise by raising everything 20 percent, or they don’t compromise at all (Weld, 2019). From this, Weld showed that he is not completely supportive of the Republican Party, hence why he was also the Libertarian vice-presidential candidate.

Biden's Minimum Wage Proposal

In addition to raising taxes, Joe Biden also supports the idea of increasing the federal minimum wage to $15. This is also a Keynesian idea. Raising the minimum wage will have minor effects on employment, but it will certainly raise consumption, aggregate expenditure, and demand for labor. Therefore, raising the minimum wage will result in a rise in employment. Nonetheless, the Classical Model believes that it would be more beneficial for the government to reduce the federal minimum wage. This is because it allows the labor market to attain equilibrium and remove involuntary unemployment. Biden argues that by putting more money in the pockets of workers, consumer spending will increase, thereby stimulating economic growth.

Conclusion

Based on Joe Biden’s proposals, it is crystal clear that he is a fan of Keynesian economics. First, he wants to increase taxes so that he can utilize the money to put into public services like education and healthcare. By putting tax money into public services, it would increase aggregate expenditure, which will lead to more jobs and household benefits like Social Security and Medicare. Biden thinks that the high taxes imposed on people, mostly wealthy people, and increasing the federal minimum wage will help the U.S. GDP grow faster, as well as shifting the PPF curve outwards. His approach is one that seeks to balance economic growth with social equity, aiming to create a more inclusive economy for all Americans.

References

Biden, J. (2017). Address to the World Economic Forum, Davos, Switzerland.

Biden, J. (2019). Remarks at the October Democratic Debate.

Weld, B. (2019). Remarks at Dartmouth College Q&A Session.