September 06, 2020
Carta Capital, based in Brazil, interviewed CEPR Co-Director Mark Weisbrot about the upcoming US elections. The Portuguese version is on Carta Capital’s website here.
CC: The Trump administration’s economic performance was doing better than expected and had a 43 percent approval rating in April, according to Gallup. Last year, GDP grew 2.3 percent, but this year, according to projections, it will fall 5.9 percent. The elected President of the United States in November, therefore, will have the arduous task of managing the country’s economic recovery after a global pandemic that could take unemployment to levels never seen since the Great Depression. Between Donald Trump (Republicans) and Joe Biden (Democrats), which candidate has the most convincing plan to recover the American economy and why?
MW: The Democrats would clearly have a better plan.
It’s very difficult to predict what Trump would do, because he goes beyond even the most opportunist of previous presidents in not having any discernible political goals or beliefs other than his own self-aggrandizement. So, we have to consider his party, since he does need their support. And, at present, we can see that the Republican Party is prevailing over Trump’s prior willingness to violate the conventional Republican Party’s (often inconsistent) neoliberal fiscal conservatism. (Trump ran fiscal deficits of 4.9 percent of GDP annually when unemployment was at a 50-year low, something that no “normal” president would do.)
Most importantly right now, the Republicans have rejected a $3 trillion relief bill that was passed by the Democratic-controlled US House in May. The immediate result has been taking away a $600-per-week federal unemployment insurance benefit that made up the majority of income for tens of millions of unemployed people. This will also have macroeconomic impacts that will cost millions of jobs, and the Republicans’ unwillingness to offer aid to state and local governments would force layoffs there (unlike the federal government, they must run balanced budgets) and also cause extensive economic harm, as well as problems for health care, education, and other essential services provided by state and local governments.
The Democrats, by contrast, have supported the $3 trillion relief bill, which includes an extension of the $600/week federal unemployment insurance and about $900 billion for state and local governments. This indicates, at present, a vast difference between the two parties. Of course, there will be Democrats who will push for premature fiscal consolidation in a Biden administration, but it is not clear that they will succeed.
In some ways, this is a very important juncture for macroeconomic policy in the US. The monetary policy of the US Federal Reserve has changed drastically since the Great Recession. The Fed kept short-term interest rates near zero for more than seven years and created an unprecedented $6 trillion through quantitative easing, in order to lower long-term rates. It is repeating this policy in the current depression, with an even stronger commitment to increase employment than it had in the past decade. But expansionary fiscal policy ― which is currently at levels not seen since during WWII ― will be even more important going forward, and there will be more struggle over that. But the Democrats in power, mainly because of the base of the party ― which has moved considerably to the left in recent years, in large part because of the mass movement presidential campaigns of Bernie Sanders ― have a much better chance of doing what is necessary for economic recovery.
Finally, it is clear that any economic recovery in the US will depend on the path of the COVID-19 pandemic. It is also clear that the Trump administration has badly managed this from the beginning, so that would be another reason to expect a better chance at economic recovery under the Democrats.
CC: As an old acquaintance of Americans, both for serving six consecutive terms as a senator and for being vice president on the ticket with Barack Obama, the image of Joe Biden is difficult to deconstruct. Not coincidentally, Trump and his campaign strategists have already decided that the target to be attacked is Kamala Harris, who is currently suffering from racist and sexist attacks ― a strategy that has worked in the past. But what Biden and the progressives did not imagine is that a significant part of their allies would question the slate itself, putting Harris’ choice in question. Was there a strategic mistake in choosing Kamala Harris, or could the choice be attractive to Trump’s constituency? Is her past (in the prosecution’s office) receiving fair and proportionate criticism or do you believe there would be a change in behavior if Harris were a man? Is the United States prepared to have a woman as vice president?
MW: There is no doubt that Trump is repeating his sexist attacks, which he used against Hillary Clinton, combined with a dose of racism which is part of his modus operandi, against Kamala Harris. It’s not clear that it will have much impact, however. There aren’t that many undecided or “swing” voters in this race, and the vast majority of those who could be persuaded by these types of appeals are not going to vote for a Democrat for president. As for the electorate as a whole, a Gallup poll last year found 94 percent said that they would vote for a woman for president. That is not to say that Republicans will not try to use sexism, and racism, against Kamala Harris, or that such attempts will be irrelevant.
As for Kamala Harris’s record as a prosecutor, or other criticisms raised by competing candidates or others during the Democratic primary, these are unlikely to be a significant issue among Democrats going forward, as Democratic voters are overwhelmingly rallying around the Biden-Harris ticket.
CC: From White House adviser to alleged con man accused of fraud related to fundraising for building a wall on the border with Mexico, Steve Bannon has been involved in the last few days, leading Trump to take action and to try to get rid of him and “We Build the Wall.” Is decoupling possible at this point? How can Bannon complicate Trump’s campaign?
MW: I don’t think this will make much difference to the Trump campaign. There have been so many scandals, including criminal charges and even convictions, in this administration; it seems unlikely that whatever happens in this case would have a significant influence on the election.
CC: How and to what extent can the protests of the Black Lives Matter movement influence the 2020 elections?
MW: The protests led by the Movement for Black Lives in the past few months, according to a New York Times review of the survey data, may have been the largest protest movement in US history ― with between 15 and 25 million people participating. Millions of people became politicized, and this will almost certainly lead to significant political changes over the coming years. We can see some of the impact already in most major media outlets and in public opinion polls, and also in some police reforms at the local, state, and federal levels. It will have some influence on the elections as well.
The November elections will be just a little more than five months after the protests started, so it is not yet clear how much impact the protests will have. But it is likely to be significant, because the general population was mostly supportive of the protests, and the coverage and discussion has raised awareness of systemic and institutional racism ― not only in the police departments or criminal justice system, but in many other areas of US culture, the economy, and society. Since President Nixon’s “Southern Strategy” of the 1970s, the Republican Party has often sought to use thinly disguised racist appeals to win the white working class votes that have often been decisive swing votes in US national elections. The hostile response of Trump and the Republican Party has highlighted some of that Party’s racism, and will help mobilize the Democratic base, including some of the millions of protesters themselves.
CC: Facebook is working out a contingency plan that includes Trump’s attempts to use the platform to delegitimize the election results. For some time, it is worth mentioning, the current president has been reinforcing his fear of fraud: either in an attempt to postpone the November elections, or by discrediting the vote through the Post Office. Is it really necessary to be alarmed? Should American democracy fear an attempted coup?
MW: Trump’s attempt to sabotage the Post Office’s ability to carry out timely mail balloting is very much a form of attempted coup. He has openly stated his intentions to hinder mail balloting. This is very likely his best chance of winning the election, both for himself and his party. Some 62 percent of Biden supporters plan to vote by mail; but only 24 percent of Trump supporters do. Thus, the efforts of his Postmaster General Louis DeJoy ― a major donor to Trump and the Republicans ― to reduce the capacity of the Post Office to deliver tens of millions of mail ballots, a huge multiple of previous elections ― could easily win the election for him, if they succeed in doing this. This is especially true since they would only have to do this in a handful of swing states, in order to win the presidency.
This is a real danger. Democrats are pushing back in Congress, and after some members of Congress threatened DeJoy with an FBI criminal investigation, he promised not to reduce the capacity of the Post Office with further changes. However, the previous changes ― which include the reduction of mail-sorting equipment ― have not been reversed. Democrats will have to do much more, including credible threats of criminal investigations for those who see to interfere in the vote count, in order to secure the vote.
The election will not be postponed, and Trump’s chances of staying in office after losing are very small. The military and “national security state” mostly do not like or respect him, or want to give him another four years. So, if he loses, he is almost certainly going to leave office.
CC: If Joe Biden wins the election in November, he will be only the second president in American history to reach the White House on his third attempt (after Ronald Reagan). Why can now be the time and turn for Biden to be president of the United States?
MW: Trump is disliked by the majority of Americans, many of whom hate him. He has a hard-core base that likes him, but it is not enough to elect him. Unlike almost all heads of state in the world, including even dictators, Trump never tried to appeal to voters outside of his hard-core base. So, unless he can suppress enough Democratic votes ― through the Post Office, or through the reduction in the number of voting places (which Republicans have done in previous elections), or other means ― he will very likely lose.
Also, the Democratic electorate is quite unified in wanting to get rid of him. Most of the major media also want him out.
CC: Although Trump has not yet eased the rhetoric of China’s trade war, Biden plans a coalition with international allies to put pressure on China. Is the path for the United States to perform better, in terms of international economic policy, in any of these projections? Or would you choose a third way? How would you beat the Chinese giant in these times of crisis?
MW: The facts do not indicate that China is a “threat” to the United States. The US has more than 800 military bases around the world; China has just one outside of its country. The US spends nearly three times as much as China on the military. Even in terms of nuclear weapons, China has about 320 nuclear warheads ― enough to provide a deterrent ― but the US has 5,800.
It is true that China’s economy is now about 25 percent bigger than that of the US, on a purchasing power parity basis (the main measure that economists use for international comparisons). But that is mainly because its population is more than four times that of the United States; on a per capita basis, it is still a developing country, with income per person about 40 percent the level of the US.
And China’s overriding objective is to develop its own economy, not to create, or maintain ― as the US does ― a far-flung empire. Perhaps this will change some day when China is a high-income country like the United States; but so far, its leadership appears most concerned with getting to be a high-income country.
For the Trump administration, its “trade wars” have been a series of distractions ― that is how he has governed since he was elected, by moving from one distraction to another. It is not yet clear how Biden will handle US-China relations, but there is no reason that the US cannot have normal relations with China. If the United States wants to make its exports more competitive, or reduce its trade deficit, it can lower the value of the dollar. It our government wants to pursue an industrial policy, as China does, it can do that too. How long it can remain the dominant military power in Asia is another story, but not one that seems to be a worthwhile goal of US foreign policy.
CC: As in the last elections, Russia is under suspicion of interfering again in favor of Donald Trump ― as reported by the New York Times on the 7th of August ― while China is considering whether to take a more aggressive attitude in the election in favor of Biden. How do you see this international scenario of interference in the country?
MW: The Russian government would be foolish to try and interfere in favor of Trump in this election, since that would further poison relations with Democrats here, who are likely to be in power in January. US intelligence officials have recently stated that “Russia is using a range of techniques to denigrate Joseph R. Biden, Jr.,” but no evidence of these allegations, or evidence of potential impact on the election, has been presented. Reports on US intelligence say that China favors Biden ― which is believable, since he seems more predictable and less likely to engage in suddenly declared trade wars ― but they have “not yet decided” whether to intervene in the presidential race. The Chinese government has been generally cautious about picking fights with the US; it seems implausible that they would take this kind of a risk, after seeing what happened to US-Russia relations since 2016.
CC: The Central Bank of Brazil recently announced that it will issue the R$200 note in an attempt to prevent inflation and currency devaluation, a response to the pandemic and the decisions of Jair Bolsonaro’s economy minister, Paulo Guedes. Is the measure a correct decision? With such bleak prospects around the world, what is the economic situation in Brazil compared to other countries in Latin America? What can the Brazilian expect from 2021?
MW: I don’t see how the issuance of a R$200 note would affect inflation or the value of the Real. Since the largest bill is currently only R$100 (or about $18 USD), it seems reasonable to have a larger bill. There has been a larger than normal demand for currency since the pandemic started, in many countries, including the US where it was quite large, similar to the huge jump during the Great Recession but reaching an even higher peak. Some of this appears to be a result of economic fears causing people to want to hold cash.
The IMF’s latest projections show -9.1 percent growth for Brazil, about the same as the -9.2 for Latin America and the Caribbean, for 2020. However, the most recent projections from Brazil’s Central Bank project -6.4 percent for Brazil, and economists polled by Bloomberg, -5.6 percent. These numbers are significantly higher than the Latin American average.
Also, Brazil’s decline in employment has been significantly less severe so far than in some of the major economies, e.g., Chile, Colombia, Mexico, and Peru. The IMF projects a rebound of 3.6 percent for Brazil in 2021, also near the same as for Latin America.
However the COVID-19 pandemic is one of the worst in Latin America, in terms of the number of cases per capita ― fourth behind Panama, Chile, and Peru in Latin America; and probably in the top 10 in the world. If the country does not get the pandemic under control, this could mean a worse economic outcome going forward. And more importantly, more than 120,000 people in Brazil have died from COVID-19 ― one of the worst human tolls in the world, in both absolute and per capita measures.
Brazil’s inflation is very low, at 2.3 percent at an annual rate, and the Central Bank has pushed its benchmark interest rate (SELIC) to an all-time record low of 2 percent.
But one of the biggest problems now and going forward is fiscal policy. Despite low inflation and record low interest rates, Guedes has announced that the country could go back to drastic spending ceilings that, under Temer, froze real spending for 20 years. He has also announced plans to cut cash transfers from 600 to 247 Reais and supports a bill that would change the constitution to allow up to 25 percent cuts in public employees’ wages. These are the kinds of measures that could kill off any economic recovery and even push the economy into depression.
CC: It is known that Jair Bolsonaro is a follower of Donald Trump, although the American president did not give him equal importance. If elected, how should Joe Biden behave towards Brazil and its president? Is Trump the best scenario for Brazil? How can the elections affect the country?
MW: Trump is doing everything he can to support Bolsonaro, diplomatically including designating Brazil as a “Major Non-NATO Ally” and advocating Brazil’s admission to the Organization of Economic Cooperation and Development; and has incorporated his government into a right-wing alliance that has pursued regime-change in Latin America ― most recently in the overthrow of Bolivia’s democratically elected government by a military coup. All of these policies of antidemocratic collaboration with right-wing governments, including Brazil, should cease immediately.
Importantly, the US Department of Justice (DOJ) has played an important role in the Lavo Jato investigations and the political persecution and coup against Dilma, Lula, and the Workers’ Party. Members of the US Congress have demanded the US DOJ “explain the scope of its involvement in the tainted and politicized case against Brazil’s former president Lula da Silva, and Brazil’s broad ‘Lava Jato’ (Car Wash) corruption investigation.”
The Biden administration should immediately answer these questions and release all information about the involvement of the US government in the investigation, the parliamentary coup, and any other political interventions against the Workers’ Party.
Of course for all of these reasons a Trump reelection would be terrible for Brazil, as for the United States and the world.