what after and "Cui bono"

November the 3rd is long past. The most media outlets in the US have declared that the winner is Joe Biden and Trump is to be succeeded by the democrat administration.

However the votes are still not counted in full and most court cases started by the republicans haven’t been dealt with yet. The reason for them are numerous allegations for fraud concerning 21 000 dead people voting[1], various allegations of mail in balloting frauds, harvest balloting frauds, not letting republican observers to witness counting processing and other.

We don’t know how all of that will play out. Many people are saying that if even all the lawsuits are won by Trump and the votes are deduced from the bulk – still there won’t be enough votes for him to stick around for another 4 years.

Another thing that made these elections such a TV show worldwide – are again the fraud allegations. If there is some merit to that story then the democrats should be the first in line addressing this issue in order to show to the American public that there is no need to panic. Instead the democrats have decided not to pay attention to the vote fraud charges and proceed with what most of the media are calling win for Biden. That alone will leave a bad mark on the American society and won’t heal the differences which are ever so wide.

With that said I want to turn our attention to something more relevant to the future that awaits us if Biden is confirmed not only by most of the media outlets but by the final vote count as well.

During the last 4 years of presidency we have admittedly determined, whether if you are on the right or left scale of political discourse, that Trump was not the best influence on American foreign policy and diplomatic relations. He was not well versed in the language of foreign affairs and often thought to be nothing but a bully when meeting or conversing with different political figures from abroad.

We all remember his visits to the UK where he met with the queen and embarrassed himself by not following the protocols. The meetings with the German chancellor Angela Merkel were noting but showing off arm mussels by not accepting the proposition for a handshake. The various meetings with the UN and NATO member states and the frankly disrespectful behavior did no good to the American international prestige.

The violation of the free market agreement with the European Union and the implementation of high tax rates on some luxurious goods were also seen as a bad sign of communication. In fact worsening the relations with the European Union was perhaps one of the worst mistakes Donald Trump has made during the 4 years of presidency. Despite the trade wars he was leading with most of the Worlds big players – the relationships with the EU should not have been brought to such a low standard.

The Trade wars were seen by the economists from different political standpoints as something both good and bad. Good because they were giving the US a fighting chance and brought back vast amount of economic power and prosperity to the country. However because it worsen the relations with most of the important economic World powers the effects on the international relations of the country was considered in general worse than before.

But what are the trade wars and why do people in power might decide to use them?

A trade war is a side effect of protectionism[2] that occurs when one country (Country A) raises tariffs[3] on another country’s (Country B) imports in retaliation for Country B raising tariffs on Country A's imports. A tariff is a tax imposed on imported goods and services.

Trade wars can commence if one country perceives another country's trading practices to be unfair or when domestic trade unions pressure politicians to make imported goods less attractive to consumers. Trade wars are also a result of a misunderstanding of the widespread benefits of free trade.

Tariffs imposed on Chinese goods, in theory, make US-made products cheaper than imported ones, and encourage consumers to buy American. They are also increasingly seen as a negotiation tactic in the trade war. The Trump administration has slapped tariffs on $250 billion in Chinese goods during the ongoing trade war. China has responded with duties on $110 billion in American products.

A truce agreed December 2018 collapsed and in May the US raised tariffs on $200bn of Chinese products to 25% from 10%. Again China retaliated with tariff on $60bn of US goods.

The US began planning to hit an additional $300bn of Chinese goods but, at the G20 in Japan in June 2018, Mr. Trump called that off and said he would continue to negotiate with Beijing "for the time being".

However both USA and international firms have said they are being harmed. Fears about a further escalation have rattled investors and hit stock markets. In addition the IMF warned a full-blown trade war would weaken the global economy.

The Trade war with the EU in the begging created tensions and left the unresolved issues with the visas for some EU countries still hanging. US motorcycle maker Harley-Davidson planed to shift some production away[4] from the US to avoid the "substantial" burden of European Union tariffs, imposed in retaliation to US duties on steel and aluminum. The EU turned and the European commission was reportedly contemplating a tariff-cutting deal to address Trump’s complaint that the EU taxes American cars at four times the rate the US taxes European vehicles. The EU would contemplate concessions only if the US offers some in return – such as eliminating its prohibitive tariffs on imported light pick-up trucks and vans – and only if other exporters like Japan and South Korea go along. One of the reasons why there are such high tariffs on US imported cars and trucks is the fact that they are not applicable to the European Union’s gas emissions restrictions.

The trade wars with Canada, Turkey and India have brought more international disputes. All created for different reasons and left off at some point were solely pointed towards the representation of the US as the new old economic leader.

In the case of Turkey the trade war and tariffs imposed on the aluminum and steel trade were understandable. Giving the position Ankara was taking on its participation in NATO and its rearmament with the Russian C-400 missiles which are not compatible with the common defense structures of the alliance we might even consider Trump doing the right thing in that particular case.

However all the trade wars would’ve been in vain if there was nothing gained from them for the US economy. The period before the COVID-19 crises is considered economic triumph. The Census Bureau’s report on “Income and Poverty in the United States” for 2019 clearly shows that, pre-pandemic, President Trump’s economic success blew past that of any other presidency[5].

First, the Census Bureau reported that real median household income grew to $68,703 in 2019, an impressive 6.8% increase over 2018. It was the largest one-year increase in median income on record going back to 1967. It was also 45 percent more growth in a single year ($4,379) than Obama/Biden produced in their entire 8 years in office ($3,021)[6].

As was the case throughout Trump’s first three years, the economic benefits were widespread. While the overall growth rate was 6.8%, real median income grew by an even greater 7.9% for Black Americans, 7.1% for Hispanic Americans, and 10.6% for Asian Americans. All record highs as were the new income levels for each of these groups[7].

The latest state GDP data is showing that during the pandemic the Democrat run states are being outperformed by the republican run states. Overall, Democratic-run states, particularly those in the Northeast and Midwest, had larger contractions in gross domestic product than Republican-run states in the Plains and the South, according to the latest state GDP data for the second quarter of 2020, released by the Commerce Department. Of the 20 states with the smallest decrease in state GDP, 13 were run by Republican governors, while the bottom 25 states with the highest decrease in state GDP were predominantly Democratic-run states[8].

Furthermore, the average unemployment rate across Republican states was 6.5% in August, compared to an average of 9% in Democrat states, according to an analysis of unemployment data by the Heritage Foundation[9].

Leaving economics aside discussing another part of the complex political spectrum after the elections for US president is important. The democrats have a historic presence in Europe and long term connections with the European Union. They are perhaps more open to cooperation and have stronger possibilities when trying to reach to an agreement with the most of the European leaders.

They are for sure the better connected politicians and are the once appealing to the concerns of many of the young left leaning people. Global issues like climate change, abandoning of fossil fuels, innovations, equality, fighting poverty are amongst the ones considered most important for many of the young people across the Globe.

In that respect the democrats have better prospects when discussing these problems and thus strengthening the relations with the European Union. Due to its left leaning policies the EU is majorly involved in various climate change actions which were seen as not necessary by the Trump administration. The Paris agreement was one of the major pacts left by the US due to unsubstantial evidence and need to act – according the president Trump’s associates and advisors.

In that regard Joe Biden and the democrats will have different view and most assuredly will go back to the Paris agreement[10]. In general on the topic of climate change the democrats are much more aligned with their EU partners, however China might take a lot of convincing.

The President-elect climate policy includes a $1.7 trillion investment in clean energy and green jobs, and calls for an end to fossil fuel subsidies and a ban on new oil and gas permits on public lands[11].

That might prove to be a bit hard since one of the major pillars of the US economy is proven to be the Non-durable Manufacturing - such as gasoline and electricity producing[12]. In that case it is possible that the economy would see a severe dip and start looking for substitutes or import. If that crucial part which employs more people and accounts for 4.4 million jobs compared to 349,000 jobs from durable manufacturing is lost that would be a crisis very hard to recover from[13].

Another part of Biden’s policy is his idea for more progressive and equitable tax code. On Income taxes Biden would repeal changes made to individual income tax rates for the wealthy (individuals with incomes over $400,000) under the 2017 Tax Cuts and Jobs Act, which means the top rate would revert back to 39.6%, from 37%[14].

Additionally, income above $400,000 would be subject to the 12.4% Social Security tax – split evenly between employees and employers. Currently, there is a wage cap of $137,700. Wages between those two ranges would not be taxed[15].

Biden also proposed capping itemized deductions at 28% of value for the wealthiest Americans[16].

On Corporate taxes:

The Tax Cuts and Jobs Act reduced the corporate tax rate to 21%, from 35%[17].

Biden wouldn’t restore the rate all the way back to its former level, instead raising it to 28%. He has proposed creating a minimum tax on corporations with at least $100 million in book profits, which means corporations, would pay either their regular corporate income tax or a 15% minimum tax – whichever is greater[18].

Another big change Biden wants to make is to tax capital gains at the same rate as ordinary income for households earning more than $1 million. Currently, short-term capital gains are taxed at the same rates as income, but long-term gains are taxed at lower rates. The top long-term rate is 23.8%[19].

Estate and gift taxes:

The Tax Cuts and Jobs Acts essentially doubled the basic exclusion amount to $11.58 million in 2020. Assets exceeding that threshold are subject to a 40% tax rate. Biden’s plan would undo that change, meaning you would be able to transfer fewer assets without triggering the tax[20]. Biden would also do away with step-up in basis, which means unrealized capital gains would be taxed at death.

The affordable care act would be another reason why many (mainly conservatives) would have reservations about the US economy under Biden. However Obama care would be concerned in a different article since it needs greater explaining.

In the light of the elections we see America which is more divided and it has been since 2016 presidential elections. That is certainly not benefiting the international relations and the social climate in the country. Biden has expressed desire to unify the US but would that be possible since there is such wide gap in the understandings of all Americans- it doesn’t look promising.

From international point of view it is interesting that most of the world leaders have expressed their congratulations to Joe Biden, however few are not happy with his win and are still silent.

During his presidency Trump has stated that he will be protecting the traditional values and family as well would keep to the conservative understandings in political and social terms. That is a massage that reflects the values of many people across the Globe. Far from all of them are with the same American – republican believe system but still having the conservative views on many topics made them more susceptible to Trump than to the far more progressive Democrats.

Such political leaders would be Victor Orban in Hungary, Katchinski in Poland, Milos Zeman in Czech Republic, Borisov in Bulgaria, Putin in Russia and many others. Most of them would be considered to be connected one way or another with the former communist – soviet past of their countries and that would hardly put them in Trumps camp. We all know Trump’s position towards socialism and how easily he blames most of the media in the US to be socialist as well most of the democrats.

The reason why many of the abovementioned leaders took a liking to Trump is first the fact the he decided to withdraw from the Middle East and especially Syria and thus make it possible for Russia, Turkey and Iran to take control over the situation. Apart from killing Al Baghdadi all US military operations in the region were generally ceased.

Another reason behind the liking of Trump by these leaders is perhaps the conservative talk. We have to understand that such talk means one thing in the US and completely different thing in member states of the EU from Eastern Europe. They are majorly using the language of political conservatives in order to mask and hide their true affiliation to the totalitarian regime in Russia. If anything we should be considering the far left and far right political structures to be first totalitarian orientated and secondly something else. That means that in the mindset of a leader such as Victor Orban there is no difference between far right or far left as long as both are pro-totalitarian. However the fact that the countries from Eastern Europe generally don’t like their communist past and like the idea of the “American dream” achieved with capitalist approach makes it easier for eastern European leaders to appear as conservative capitalists officially orientated towards the European values, free market and the US, while behind the curtains playing in favor of Moscow.

If I am to summarize perhaps simplifying the general perspective is not such bad idea.

If Biden is elected president (most likely) – then we should prepare for worsening of the US economy compared to the period prior to the COVID-19 crisis. However in the international affairs Biden would be much more successful than Trump and perhaps we will see much more America in the international affairs compared to what we have seen till today. He is more likely to participate in a grand coalition against Russia in order to resolve Crimean question as well to spend more funds on aligning the NATO members. That is certainly good news for all the countries in close proximity to Russia. Perhaps a bad outcome would be if the US gets involved so much in the international affairs that they put themselves in another war (something we have seen under almost all democratic administrations).

If by some chance Trump gets into the president’s seat again it will mean more of the same. The US economy would perhaps get better depending on how widespread is the COVID-19 crisis. On international level America will be still more orientated towards its inner issues and less concerned with the rest of the World. The US prestige will diminish on the diplomatic field and perhaps the only success that will remain are the peace talks in North Korea.

Overall the situation with the elections suggests that president will be Joe Biden.

However it is good to have division of powers - President on one side and senate and state house control driven by the opposition. This brings equilibrium to certain extend. Having the control in all parts of government taken by one party is something no democracy should strive for.

[1] https://www.theblaze.com/news/lawsuit-dead-people-registered-vote-election?utm_content=buffer24bbd&utm_medium=referral&utm_source=facebook&utm_campaign=fb-louderwithcrowder&fbclid=IwAR00R41A9iV5-ZAXu1G2lvaUivdaS54OEqjCDaMHB5qchN_arlAhfHNj_Vc [2] https://www.investopedia.com/terms/p/protectionism.asp [3] https://www.investopedia.com/terms/t/tariff.asp [4] https://www.bbc.co.uk/news/business-44604280 [5] https://www.census.gov/content/dam/Census/library/publications/2020/demo/p60-270.pdf [6] https://www.census.gov/content/dam/Census/library/publications/2020/demo/p60-270.pdf [7] https://www.census.gov/content/dam/Census/library/publications/2020/demo/p60-270.pdf [8] https://www.bea.gov/sites/default/files/2020-10/qgdpstate1020_0.pdf [9] https://www.bls.gov/web/laus/laumstrk.htm [10] https://edition.cnn.com/2020/11/09/politics/biden-climate-plan-election-intl-hnk/index.html [11] https://edition.cnn.com/2020/11/09/politics/biden-climate-plan-election-intl-hnk/index.html [12] https://www.investopedia.com/articles/investing/042915/5-industries-driving-us-economy.asp [13] https://www.investopedia.com/articles/investing/042915/5-industries-driving-us-economy.asp [14] https://taxfoundation.org/joe-biden-tax-plan-2020/ [15] https://taxfoundation.org/joe-biden-tax-plan-2020/ [16] https://taxfoundation.org/joe-biden-tax-plan-2020/ [17] https://taxfoundation.org/joe-biden-tax-plan-2020/ [18] https://taxfoundation.org/joe-biden-tax-plan-2020/ [19] https://taxfoundation.org/joe-biden-tax-plan-2020/ [20] https://taxfoundation.org/joe-biden-tax-plan-2020/