NEW YORK (Reuters Breakingviews) - The final televised debate of the U.S. presidential race offered a blast of nostalgia. In contrast to the chaos and mudslinging of the previous face-off – and the Donald Trump presidency in general – it was a more civilized policy discussion, like debates used to be. A tough moderator and a mute button helped. Yet there’s one major difference from previous electoral cycles: concern about giant U.S. debt has been cast aside.
Deficits and debates usually go together. Former presidential nominee Hillary Clinton and Trump tussled in 2016 about who would add more to the nation’s borrowings, at a time when debt held by the public was around $14 trillion. The Democrat even praised her husband, former President Bill Clinton, for running surpluses. Four years earlier, with the debt around $11 trillion, then-President Barack Obama and his Republican challenger Mitt Romney sparred about the same topic.
Now with debt at $20 trillion, according to the Congressional Budget Office – almost 100% of GDP – neither candidate seems inclined to bring it down. Biden on Thursday repeatedly stressed the need to get money to businesses to help deal with the effect of Covid-19 shutdowns. Trump didn’t push back over this fiscal largesse, beyond a head-scratching claim that Biden’s climate change plan would cost “a hundred trillion dollars” – and has no grounds to, having argued for massive stimulus himself.
For investors, this is soothing, in a way. Trump’s new policy proposals are mostly non-existent, meaning continued low taxes, offset with trade wars and vicious inequality. A Biden presidency could, though, serve bitter pills to capitalist America. He is committed to a nationwide minimum wage, which Trump argued would suit New York but ruin a less wealthy state like Alabama. Biden is also a long-term friend of labor unions. And he plans to hike the corporate tax rate to 28%, from 21%.
But a Biden who kept fiscal discipline off the agenda would be less fearsome for financial-market watchers. Stimulus ought to be positive for stocks, for example, if not for the dollar. And while a tax-rate hike may hit stock valuations, a 28% rate would still be the lowest since World War Two, prior to Trump’s presidency. Many large firms have voluntarily raised minimum wages anyway. With less than two weeks to go, markets can at least be reassured that while America’s character may be on the ballot, austerity is decidedly not.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.