You have established several scenarios of electoral results and compared your estimates of growth, job creation, deficit ... Can you give us details?
MARK ZANDI: Chief Economist for Moody's Analytics - Indeed, we have based ourselves on four possible scenarios. The first, which we estimate the probability at 40%, relies on a victory for Joe Biden, a maintenance of the Democratic majority in the House of Representatives, and a maintenance of the Republican majority in the Senate. In the second scenario, we envision, with a probability of 35%, a victory for Trump, associated with a Senate with a Republican majority and a chamber with a Democratic majority, as now. In the third scenario, we examine the possibility, with an estimated probability of 20% for this scenario, of an all-out Democratic victory, both in the White House and in the House of Representatives and the Senate. And finally, a last scenario, which would be the opposite, that is to say a Republican victory in the White House, but also in the House of Representatives and the Senate, with a probability of 5%.
At both extremes, a total victory for the Democrats, our estimate of GDP growth would be 4.2% in 2021 and 7.7% in 2022, while in the event of a total victory for the Republicans, GDP growth would not be. would only be 2.9% in 2021 and 3.8% in 2022. Similarly, in the event of a Democratic wave in Washington, the unemployment rate would fall to 8.3% in 2021 and to 5.2% in 2022, while in the event of a Republican wave, the unemployment rate would be 8.5% in 2021 and 7.1% in 2022. Finally, with regard to the deficit to GDP ratio, in the first case, that of a total Democratic victory, this ratio would be 109.6 in 2021 and 112 in 2022. In the event of a total victory on the part of the Republican Party, we expect a ratio of 109.1 in 2021 and 110, 7 in 2022.
The truth is undoubtedly located in the middle ... Anyway, it is clear that a Democratic administration would be immediately more aggressive in its fight against the pandemic, condition sine qua non for a return to the growth then.
Regarding international trade, how do you view Biden's philosophy and its impact on US trading partners?
Biden will normalize trade relations, especially with the European Union. This will mean, in the medium term at least, the end of the additional customs duties imposed in 2018 by the Trump administration (25% on steel and 10% on aluminum from the Union). On China, Biden will keep the pressure on Beijing to respect international trade rules, especially with regard to intellectual property, and will arguably use the additional tariffs put in place by the Trump administration as leverage for negotiation in first.
In any case, I believe that President Biden will be keen to act in concert with other economic powers, and in particular Europe. Besides, I can assure you that Biden does not see the EU as a bad trading partner, as Trump did, on the pretext that the United States has a trade deficit with it!
Finally, Biden could return to the Trans-Pacific Partnership Agreement, a project that excludes China and from which Trump withdrew in January 2017. In general, Biden will support major multilateral institutions, whether it is the World Trade Organization. , the International Monetary Fund or the World Bank ... In addition, because we expect stronger economic growth if the Democrats win on November 3, the main trading partners of the United States, including Europe, will themselves see their growth driven by American progress.
The French, and the rest of the world, are very attached to respecting the Paris Agreement on the climate. What progress do you see in this area?
Beyond the fact that President Biden will join, of course, the Paris Accords, it is important to note that his program gives pride of place to the environment and the green economy. Its spending plan (totaling $ 7,900 million over ten years) which includes, among other things, social assistance, health, education and investment in infrastructure, includes $ 2,400 billion to finance, still on ten years, green energy and efforts in favor of the environment. Biden is very active on the environment and the fight against global warming. In general, given the current economic situation, a strategy based on a rapid increase in budgetary expenditure makes sense. This will certainly increase the deficit, but the impact of the pandemic on activity is huge and the job market is devastated, while inflation is very low and so are interest rates.
Are there any other Democratic economic proposals that have caught your attention?
Yes. I am thinking of everything that goes in the direction of greater social mobility and better social cohesion, with greater access to health, housing, education and training. Remember that since the Reagan years, the wealth gap has grown steadily. This implies efforts aimed at minorities, as well as towards less qualified workers. All the more so since it is clear that the deterioration of the situation of those who find themselves on the margins of society gives rise to a number of problems, including demonstrations which degenerate. Creating good, well-paid jobs is an essential goal for everyone to feel they belong in American society.
Do you think that a new rescue plan for the economy will be adopted before the election?
Even though negotiations have resumed between Democrats and Republicans in Congress, I do not believe they will be able to succeed until November 3. We can consider adopting such a plan between the post-election day and the elected officials take office, through what is called a “lame duck” Congress, but this possibility is low. Negotiations should not really resume until the new Congress takes office, with a final envelope of, say, 3.5 trillion dollars if the Democrats win in both houses and the White House, and 1000 billion if the Congress is divided between a Republican majority in the Senate and a Democratic majority in the House of Representatives. And if Trump wins, the stimulus is likely to be less than $ 1,000 billion.