Michael Strain on the Differing Economic Policies of Trump vs. Biden

Episode Summary

Executive Summary: David Beckworth and Michael Strain assess Trump’s economic record and the likely policy direction under Biden. Strain gives Trump low marks on trade and immigration, credit for the 2017 tax cut and deregulation, and mixed-to-positive views on Fed criticism. He argues a Biden term would likely raise corporate and high-income taxes, pursue more competent but still hawkish China policy, restore a pro-immigrant stance, and possibly focus on health care or climate/energy reform.

Main Topics: Trump’s trade war and China policy (Priority: 5/5): Strain argues Trump failed by his own trade metrics: the trade deficit did not fall, blue-collar manufacturing did not rebound, and USMCA was not a dramatically better deal than NAFTA. He says tariffs raised consumer prices, reduced product variety, increased input costs, and hurt allies without producing a coherent coalition against China. 2017 tax reform and business investment (Priority: 5/5): Strain is broadly supportive of the Tax Cuts and Jobs Act, especially the permanent corporate tax cut, but says the expected investment boom was obscured by trade-war uncertainty and overly optimistic public claims about immediate wage gains. Deregulation under Trump (Priority: 3/5): The conversation notes that Trump reduced federal regulation relative to the prior administration, which Strain sees as economically positive but limited because executive-order changes are easy to reverse and were not locked in legislatively. Immigration as long-run economic policy (Priority: 5/5): Strain calls Trump’s immigration record a disaster that threatens long-term growth, arguing the U.S. needs more immigration—not less—to offset weak demographics and sustain labor-force growth. He criticizes efforts to reduce both legal and illegal immigration. Federal Reserve and monetary policy (Priority: 3/5): Strain says Trump was often more right than wrong in criticizing Fed rate hikes, but warns that public pressure on Fed independence could damage credibility and inflation outcomes if continued. What a second Trump term might look like (Priority: 2/5): The transcript highlights uncertainty about Trump’s second-term agenda, noting vague campaign signals and GOP messaging about space, infrastructure, internet, health care, and possibly tax changes, but no clear legislative roadmap. Likely economic policy under Biden (Priority: 5/5): Strain expects Biden to pursue higher corporate and high-income taxes, more coherent and allied trade policy, a pro-immigrant stance, and potentially major action on health care or climate/energy—depending heavily on Senate control.

Key Arguments: Trump did not meet his own trade-policy goals: the trade deficit rose, manufacturing revival did not materialize, and trade deals did not become clearly better for the U.S. Tariffs are economically damaging because they raise consumer prices, reduce variety and quality, increase input costs, and trigger retaliation that depresses manufacturing employment. The right critique of the TCJA is not that it failed instantly, but that effects on investment and wages take time; trade-war uncertainty likely muted the law’s benefits. The 21% corporate tax rate was a needed improvement because the U.S. had been at a competitive disadvantage relative to other developed economies. Trump’s deregulation agenda improved the business environment, but much of the effect is temporary because future presidents can reverse it. Immigration restrictions are economically harmful in an aging, slow-growth economy; more immigration is the only scalable way to expand labor-force growth. Trump’s anti-immigrant rhetoric damaged America’s image and could reduce its ability to attract talented workers, harming long-run prosperity. Trump’s criticism of the Fed was often directionally correct, but repeated attacks on independence risk undermining confidence in monetary policy. A Biden administration would likely be more orderly and cooperative in trade, but still hawkish on China; the big question is whether it preserves or reverses globalization. Biden is likely to back higher taxes on corporations and affluent households, with the precise package depending on Senate composition.

Data Points: Corporate tax rate (TCJA): 35% to 21% - Strain cites the permanent corporate tax cut as the centerpiece of Trump’s 2017 tax law. Senate filibuster workaround: Budget reconciliation - Used to pass the TCJA and is why many provisions are temporary. Immigration proposal size: Reduce immigration by half - Strain says the White House-backed legislative proposal would have sharply reduced immigration. Income threshold mentioned in Biden tax discussion: Above $400,000 - Referenced as the level above which Biden would raise income taxes. Potential corporate tax hike under Biden: 21% to 28% - Mentioned as a likely direction in discussion of Biden’s tax agenda. Duration of U.S. prosperity from alliances: Seven decades - Strain says NATO and allied institutions have supported U.S. prosperity for about 70 years. Fed policy period referenced: Over the past few years - Trump criticized the Fed for rate increases during his presidency.

Pivotal Quotes: "I don't think he succeeded by his own standards." — Michael Strain: On whether Trump achieved his stated trade-policy goals. "The president has essentially hung a sign on the front door of the United States that says, you are not welcome here." — Michael Strain: On Trump’s anti-immigration posture and rhetoric. "What you would expect to happen is that because the after-tax return on investment was higher, that investment decisions that were on the margin when the rate was 35% would no longer be marginal investment decisions." — Michael Strain: Explaining how the TCJA should affect investment over time.

Implications: Listeners should expect continuity in Trump-era skepticism toward trade and globalization if those politics persist, but a Biden win would likely restore more conventional pro-immigration, pro-alliance, and higher-tax policymaking. The biggest economic swing factor is whether policy becomes more coordinated or more inward-looking.