Biden's economic agenda risks mid-term elections: An analysis of Biden's economic agenda and its effects on the American economy

Gero Kunath, Jürgen Matthes and Thomas Obst

No 59/2022, IW-Reports from Institut der deutschen Wirtschaft (IW) / German Economic Institute

Abstract: President Joe Biden faces some political and economic headwinds in the upcoming U.S. midterm elections this year. Current economic challenges include historically high inflation rates and signs of an impending recession. [...] This paper gives a critical overview of the political and economic environment the Democratic party is facing in the November 8 midterm elections. We analyze the economic effects of Bidenomics and quantify the effects of the vast fiscal programs on the U.S. economy discussing the issue of inflationary pressures of the expansionary fiscal policy programs. The analysis shows that while the American Rescue Plan has substantially increased aggregate demand in the U.S. economy and stimulated export demand for countries like Germany it has likely added to the current issue of high inflation rates, e.g., caused by core inflation items rather than exogenous energy shocks as in Europe. However, while programs such as the Inflation Reduction Act do not add further substantial stimulus on an annual basis all these programs contain a transformative element that possibly makes it attractive for U.S. companies to invest in new technologies, infrastructure, and green energy networks. This improves the capital stock, making positive longer-term positive effects on potential output more likely.

JEL-codes: E37 H11 H87 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwkrep:592022

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