A Trump-Biden election could be critical for the economy and your wallet

Key takeaways

  • Presidential contenders Joe Biden and Donald Trump have very different approaches to public policy, setting up a 2024 election with big implications for the economy and personal finances.
  • The winner of the race will preside over the expiration of several provisions of the Tax Cuts and Jobs Act, deciding whether to extend or expand many of the bill's tax cuts, with Trump more likely to cut taxes on high-income earners.
  • A Biden victory would mean more student loan forgiveness, which Trump opposes. 'Garbage fees' and green energy tax breaks will be among the other issues on which the candidates have opposing views.

As the presidential race between Joe Biden and Donald Trump heats up, the two candidates are promising very different approaches to public policy when it comes to money.

After voters in 15 states went to the polls in primaries on Tuesday, Biden and Trump are closing in on their respective parties' nominations for the November general election. The effect of that race can have a big impact on the economy and household budgets. Here are some key issues to pay attention to.

Tax Cuts and Jobs Act

The incoming president will have to make some of those decisions immediately. Key parts of the Tax Cuts and Jobs Act—a package of Trump-era tax cuts—expire at the end of 2025. For example, the top tax rate for high earners will rise from 37% to 39.6%. . The standard deduction — the amount of your income that doesn't count toward your federal taxes — is cut in half. For an individual filer, that would be adjusted to $6,500, then adjusted for inflation, which was $14,600 last tax season.

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Biden has called for repealing TCJA tax cuts for the wealthy, restoring the top marginal tax rate and imposing new taxes on billionaires and people making more than $1 million a year to reduce the budget deficit.

For his part, Trump has touted the economic benefits of his administration's signature legislation and promised „lower taxes” on his campaign website. A Trump victory, especially if Republicans win control of Congress, would increase the chances that the TCJA's provisions for businesses and high-income earners would be extended.

Student loan forgiveness

Few groups will face dramatically different policies under the two candidates than student loan borrowers. Biden has supported forgiving federal student loans, while Trump has vehemently opposed it.

Biden proposed forgiving up to $20,000 to each borrower — a move struck down by the Supreme Court last summer — but he changed the rules for how existing student loan forgiveness programs work. Canceled from Feb.

Trump has taken the opposite approach. While the Supreme Court's conservative majority blocked Biden's amnesty plan, Trump praised the ruling and said the amnesty was unfair to those who had already paid the debts.

When Trump was last president, the Education Department resisted attempts to discharge student loans under „borrower protection” provisions that allow people to forgive their loans if they were misled by the schools they attended.

Biden's Campaign Against 'Junk Tariffs'

The election will determine whether the Biden administration's war on what he calls „trash tariffs” continues. Under Biden, regulators have banned businesses from imposing fees on customers, particularly on financial products. On Tuesday, the Consumer Financial Protection Bureau (CFPB) imposed an $8 cap on late credit card payment fees, which currently average $32. The bureau has also proposed restricting banks from charging overdraft fees to customers who spend more money than their account balances.

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Under Trump, the CFPB—the government's consumer watchdog—has taken a more business-friendly approach, rolling back Obama-era restrictions on payday lending and taking fewer actions against debt collectors.

Green Energy Tax Credits

Biden has signed legislation promoting green energy, including a $7,500 tax credit for the purchase of an electric car. For his part, Trump has criticized electric vehicles and said he would end policies that promote them.

„Now, they want to give you electric cars. Does anyone want to drive for an hour and recharge for four hours?” Trump said in a speech last June in Columbus, Ohio. „First day in the office, I'll be done with it all.”

The big economic picture

All of these policies and others will have a major impact on the broader economy. In general, a Republican victory would bring lower taxes, especially on high earners and businesses, while a Democratic victory would bring higher taxes for those groups.

A Republican regime on taxes would „bring slightly faster economic growth, higher inflation, larger budget deficits, higher Treasury yields and a steeper yield curve,” economists at Wells Fargo wrote in a research note.

They predict that if government is divided between two major parties, each controlling at least one branch of government, the tax effect would „moderately reduce the 2026 outlook for growth, inflation, government debt and yields.” A Democratic sweep—the Senate seats are unlikely to be up for grabs—would result in tax policy that would set the economy somewhere between the other two possible outcomes.

The economy can be affected even before the election. Economic research shows that partisan conflict increases during presidential election years, said Ryan Sweet, chief economist at Oxford Economics, in a research note. Historically, extreme partisan conflict—resulting in legislative deadlocks and gridlock—has had a small but significant impact on economic growth, boosting it in the short run but depressing it in the long run, Sweet wrote.

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„An initial increase in monthly GDP around the shock of political conflict may lead to the impression that gridlock is good for stability in fiscal policy, but over time, it's corrosive to the economy—interference with 'past-the-past' legislation worries consumers and businesses alike,” he said. wrote

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