In the end, for the Democrats it was a case of euphoria mingled with relief. Relief that they had not managed to snatch defeat from the jaws of victory. Relief that the president’s lies about electoral fraud failed to gain traction. Relief that Donald Trump’s days in the White House are now numbered.
But really, it should not even have been close. There may have been worse presidents than the one Joe Biden has defeated but off hand it is hard to name one. A disastrous last year means Trump is on course to be the first occupant of the White House since the second world war to preside over a net loss of jobs. When Herbert Hoover did that during the Great Depression he won only six states in the 1932 election and secured less than 40% of the vote.
And Hoover merely presided over an economic catastrophe: Trump has seen the economy shrink and more than 230,000 Americans die of Covid-19. Yet Biden just about squeaked home and the Republicans held on to the Senate. There was no blue wave, although there ought to have been.
Before Biden, the last politician to oust an elected US president was Bill Clinton, who defeated George Bush senior in 1992 with a bit of help from the third-party candidate Ross Perot. What followed was the long boom of the 1990s during which unemployment came down, the stock market soared, US tech companies were at the forefront of the digital revolution and a budget deficit was turned into a surplus.
Biden faces a much stiffer challenge. When Clinton became president, the US economy was recovering from the relatively mild recession of the early 1990s and China’s assimilation into the global economy represented an influx of cheap imports rather than a threat to America’s supremacy. Briefly, it was a unipolar world back then.
But where there were tailwinds for Clinton there are now headwinds for Biden. The recovery in the US is slowing as people change their behaviour in response to Covid-19 infection rates that are reaching new peaks daily. The impact of the stimulus package that boosted consumer spending in the spring and summer has faded and another boost is badly needed.
Nothing about Trump’s record suggests he will lift a finger to help Biden between now and his inauguration early next year. Nor will Biden be able to rely on a helpful Congress when he does take office. Rather, Republicans will use the size of the US budget deficit – 15% of national output this year – as an excuse for blocking the new president’s spending plans. The lack of a blue wave will have consequences.
The likely gridlock in Congress means more of the onus for stimulating the economy will fall on the Federal Reserve. In many ways, the most important economic actor in the years ahead will not be the president but the chairman of the US central bank, Jerome Powell.
Wall Street is expecting the Fed to ramp up its quantitative easing programme next month, buying more financial assets so that it can pump money into the economy. But Powell himself has recognised that there is a need for monetary action (the stuff the Federal Reserve is responsible for) to be accompanied by fiscal action (tax and spending policy).
Monetary policy is no answer to America’s need to renew its infrastructure or to make its welfare system more generous. To the extent that it does make a difference, QE works by pushing up asset prices and creating a feel good factor so it tends to be better for Wall Street than for the struggling communities in the less well-off states.
One thing the 2020 elections have shown is that the US contains millions of angry, discontented people who were unconvinced by Biden and were prepared to give Trump a second term despite his record.
What’s more, the chastening thought for the Democrats is that had it not been for Covid-19 Trump would have won because his economic record in his first three years – while not as spectacular as he claimed – was pretty solid. The economy grew steadily, the unemployment rate was at a 50 year low and had come down for all ethnic groups, real incomes were growing and the stock market reached record levels. The political calculation for the Republicans will be simple: make life as difficult as possible for Biden and our solid core support means we will win in 2024.
Biden is unlikely to buy the argument that he would have won bigger had he been more radical. The president-elect is no climate-change denier but nor is he a massive fan of the sort of green new deal championed by Bernie Sanders and Alexandria Ocasio-Cortez. Biden’s will be a safety-first presidency, with one eye always on the states that the Democrats will need again in four years time: Michigan, Wisconsin, Pennsylvania.
It also means there is unlikely to be a dramatic shift on trade policy or in the US stance on China. America is a different country from the one it was in the 1990s, when Clinton supported both the North American Free Trade Agreement and the creation of the World Trade Organization.
Biden will not be as openly protectionist or as hostile to China as Trump has been but his underlying approach will be similar: an America-first procurement policy, reform of the WTO, a hard line with Beijing on state-subsidised industries and the theft of American intellectual property rights.
Clinton fully embraced globalisation, but that was before its hollowing-out impact on small-town America became evident and before China started to flex its muscles. Many voters liked Trump’s economic nationalism. Biden will have noted that.
