US: Fiscal stimulus package and election situations

Trump said that after leaving the fiscal stimulus package talks with the Democrats to post-election, a small stimulus package that includes many aid measures, including checks, airline assistance, and payroll protection could be passed. (Tera Yatırım)

Trump said that after leaving the fiscal stimulus package talks with the Democrats to post-election, a small stimulus package that includes many aid measures, including checks, airline assistance, and payroll protection could be passed. With Trump's announcement about aid to airline companies and other incentive measures, developments on this front have become monitored again. At this stage, the shape of the incentive package will vary depending on who will be the president in the election and how the distribution of Congress will be shaped.

 

The package of Democrats finds more response over the economy as a whole. The Republican aid package is more reduced and is based on social assistance and problematic companies. Despite passing through the House of Representatives, the package, which has not received a response from the Trump administration, is amounted 2.2 trillion USD. If Biden wins the election and the Democrats control the Congress (House and Senate simultaneously, the so-called “Blue Wave”), the size of the package after the election may increase even more, reaching the levels of 3-3.5 trillion USD. In such a scenario, Democrats have a chance to pass this package without needing Republican approval. Fed Chairman Powell has consistently underlined the need for a financial aid package for the economy to move forward, saying that "too much incentives will do no harm, but less incentives will do more." There have been no social benefits since July, and unemployed Americans are waiting for money. Businesses have not been able to fully recover, and they are also having trouble raising employment. Although the problem is bigger on the basis of small and local enterprises, the situation is not very bright in large companies, but there is a significant decrease in personnel with mechanization and transition to automation system. In other words, when things are somewhat on track, a significant portion of those who were unemployed during the virus period will not be recalled.

 

The most ideal scenario before the election would be to pass the version of the current Democratic package down to 1.5 trillion USD with Republicans approval, but Trump's halt to negotiations made it out of the game. Despite the inclusiveness of the Democratic package and its support for the long-term transformation of the economy, the Trump plan includes more specific areas. From his last statement, it is seen that these aids will focus on the sectors that cause the most problems, such as airlines, and unemployment benefits and paychecks on an individual basis. If Americans are not able to find jobs, subsidies and checks are the way they can spend.

 

Regardless of whether Trump wins the election or whoever wins, we can put aside the expectations of a super-sized package in the "lame duck" situation. If Biden or Trump becomes president, but they do not take full control of Congress, there will be a package that will be filed and negotiated for a long time. If a Congress is fully under Trump's control, a very specific and narrow package will pass in a short time. It is worth noting that if the structure of the President or Congress changes during the elections, this change will take place in January. So we'll have to wait a little longer for a super-sized pack. As Powell said, the side effects of over-aid are few and can be dealt with, but “a dollar less, a day late” financial aid will have repercussions such as permanent increases in unemployment and bankruptcy. We will enter a period when the zombie company problem will be experienced at a deeper level than the Lehman Brothers crisis.

 

Although Biden has the wind at his back for election, I think the only factor that strengthens his hand is the economic crisis. In the US elections since the 1980s, the Republican presidential candidate lost in times that coincided with the crisis and the Democrat candidate won. The 90-91 recession, despite victories in the Gulf War and the Cold War, Father Bush lost the 1992 elections to Clinton; or the McCain, who was a candidate to replace Bush, whose term of office expired lost to Democrat candidate Obama, in 2008 elections when the Lehman Brothers crisis’ effects were felt. Trump’s strength is the American election system, which the people vote for elective delegates, not for the President directly. The winner of a state gets all the elective delegates of that state, and the number of delegates varies according to the population density of each state. The important thing is to be able to take the bigger states that are in the middle of each parties. Trump can comfortably compensate for the votes he cannot get from big cities from small cities, towns and countryside. For example, Trump has no chance for the city of Miami in Florida, but the votes from Tampa can bring him the state. When Trump takes these kinds of states by a small margin, he would comfortably win, like the 2016 election. I am waiting for an election which the result will not be known until the last moment.

 

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