August 2020 Volume 2

COVER STORIES

Tax Changes Joe Biden has been quite clear that if he became president he would look to roll back the 2018 corporate tax cuts from 21% to 28%while also going back to the top marginal rate of 39.6% for individuals (the current top marginal tax rate for individuals is 37%). He’d also look to make changes to the carried interest loophole as well as seek changes to the current capital gains rate (the current rate is 20% – Biden has not indicated what percentage rate he would seek, but speculation is that he and a Democratic Congress would want to match the capital gains rate to the top marginal individual rate). The economic stimulative rationale is to raise revenue to fund other recovery plans. But admittedly, this will be a difficult task in any electoral scenario, particularly if the 60-vote filibuster is still in place in the Senate. President Trumpwould like to put in place a payroll taxmoratorium. He proposed it earlier this year when Congress passed the first three recovery packages; it was not included. It is hard to see this payroll tax holiday becoming law under any electoral scenario. Congressional Republicans and Democrats have all rejected it outright. Buy American Both Trump and Biden have called for tighter “Buy American” laws, whose effect is designed to benefit U.S. manufacturing firms in the government procurement process. Trump has not said how he would specifically look to do this. Biden has been more specific, however, saying that he would invest $400 billion over four years in the government procurement process of American made goods and services while requiring that companies receiving procurement contracts pay workers “at least $15 per hour, provide paid leave, maintain fair overtime and scheduling practices, and guarantee a choice to join a union and bargain collectively.” The idea behind “Buy American” is obviously altruistic and serves to prop up American-based manufacturing companies who often face unfair competition from foreign actors whose products are priced lower. It seems like, no matter the make-up of Congress combined with either a Democratic or Republican president, a reworked Buy American policy in some form is imminently doable. However, it is important to note that the policies put in place around this would likely only apply to government procurement. It would be near impossible to institute a Buy American purchasing policy across the entire country. However, Buy American presents a great opportunity for American-based companies in the forging industry – but the devil will be in the details when it comes to country of origin content requirements and other factors. Trade Should either administration pursue the Buy American route, the short-term victim would be international trade, and even if Buy American isn’t enacted, it is difficult to see how trade could be properly used to stimulate our economy. Our country, and many others across the globe, have turned inward and soured on international trade. As folks have come to learn over the last three and a half years, the Trump administration has been reticent to seek

treated as a fait accompli. The United States Senate is currently controlled by Republicans, who hold a 53 to 47 majority. Every two years, a third of the Senate is on the ballot. This year, 35 senate seats are up for grabs: 12 Democratic seats and 23 Republican. To win control of the Senate, Democrats would need to pick up a minimum of three seats and the White House (the Vice President of the United States serves as President of the Senate and would therefore cast the 51st majority vote) or four seats to have an outright majority no matter who occupies the White House. Of those 35 seats on the ballot, there are competitive races occurring in Arizona, Colorado, Georgia (where both senate seats are on the ballot), Iowa, Maine, Michigan, Montana, North Carolina, and South Carolina. Of those 10 races, all but one are currently occupied by Republicans. Given the recent polling numbers, there is a very real possibility of Democrats winning four or more seats, enabling them to take control of the Senate. At the beginning of 2020, this was not a likely scenario, with many believing the Senate would stay in Republican hands. However, the Trump administration’s response to the pandemic has weakened the president’s overall approval numbers, which has had a trickledown effect on the approval numbers of congressional Republicans, allowing for the competitive map to widen and putting more races in play. The United States House of Representatives is currently in Democratic hands by a 233-199 majority (there are three vacancies). All 435 congressional seats are on the ballot this fall. To win the majority, Republicans will have to win a minimum of 19 more seats than they have now. Given where things stand today, this is not an easy lift. Traditionally, more Democrats vote in presidential election years than they do in congressional elections that do not include the president. In 2018 – an off presidential year – Democrats managed to capture 41 seats and win back the House. With more Democrats poised to vote in 2020, therefore, it is very hard to see Republicans taking back control of the House. Given all of this, there are eight electoral outcome scenarios. We list them all out below ranked by likelihood: White House Senate House Likelihood Scenario #1 Biden GOP Dem Likely Scenario #2 Biden Dem Dem Likely Scenario #3 Trump GOP Dem Likely Scenario #4 Trump Dem Dem Unlikely Scenario #5 Biden Dem GOP Highly Unlikely Scenario #6 Trump Dem GOP Highly Unlikely Scenario #7 Biden GOP GOP Highly Unlikely Scenario #8 Trump GOP GOP Highly Unlikely Let’s now take a look at how some of these likely electoral outcomes can affect what economic policies could be considered next year.

FIA MAGAZINE | AUGUST 2020 15