DAVID GREENE, HOST:
We keep talking about this presidential election as consequential, setting the course for our country for years to come. Well, let's examine one part of that - how the outcome might impact the U.S. economy. To talk about that, we have David Wessel with us. He is often on our program. He's director of the Hutchins Center at the Brookings Institution. David, thanks for being here on Election Day.
DAVID WESSEL: Good morning, David.
GREENE: Well, you have said on this very program that presidents get more credit and also more blame for what happens to the U.S. economy than they really deserve. So I guess my first question is, does it matter who wins when it comes to the economy?
WESSEL: Well, I did say that, and it's true. But this year, I think it really does matter who wins the election. The most important factor, of course, in the near-term economy is what happens with the coronavirus. But another huge factor is whether the federal government will deliver another couple trillion dollars of fiscal stimulus to the virus-ravaged economy. The first dose of stimulus helped a lot, but it's worn off.
If Joe Biden wins and the Democrats take the Senate, we're almost certain to get a big fiscal package - at least $2 trillion of aid to households, state and local governments, small businesses - very shortly after Inauguration Day. And that should give the economy a big lift. And, in fact, that's the scenario that the stock market seems to be expecting and welcoming, even though Joe Biden is talking about raising taxes on investors. Now, if Donald Trump wins reelection, I think we'll still get some fiscal stimulus, maybe even in the lame duck of Congress, but it'll be smaller, and it's much more likely to have tax cuts along with big spending increases.
GREENE: And what about the bigger picture? If the economy and when the economy recovers from the weaknesses from the pandemic, I mean, what would a Trump second term look like versus a Biden presidency?
WESSEL: Well, I think they'd be pretty different. It's clear that President Biden would mean higher taxes, particularly for rich people and corporations, and that - and I think it would mean that the government would lean much more heavily against the inequality that the market is producing. If he gets a Democratic Senate, it probably means a big and green public infrastructure program. But no matter what happens in the Senate, the regulators whom Joe Biden would name would surely be more aggressive than their Trump counterparts have been. In contrast, a Trump win would likely mean further rollbacks of labor, environmental and financial regulation.
GREENE: Are there reliable, historic trends that tell us, like, the economy does this when a Democrat is president and this when a Republican is president?
WESSEL: Well, there are trends. I'm not sure how reliable they are.
(LAUGHTER)
WESSEL: A few years ago, a couple of Princeton economists, Alan Blinder and Mark Watson, looked into this. And they found that since 1947, the GDP has risen more when a Democrat replaced a Republican in the White House than vice versa. But in large part, that had to do with the timing of oil price shocks and surges in productivity that really had a lot more to do with luck than presidential policies. Alan Blinder, as a former vice chair of the Fed, said for a while it looked like Trump was going to be an exception to this pattern, but then the coronavirus hit.
GREENE: What about the Fed? I mean, President Trump has been pretty tough on the Fed chair, Jay Powell. I mean, would we see different things from the Fed depending on who's president?
WESSEL: Well, it's interesting. The Fed has not been an issue in the election, and top Fed officials who meet tomorrow and Thursday are relieved about that. I don't think the outcome of the election is going to make much difference. But whoever wins the election is going to have a chance to reshape the Fed. Two of the seven seats on the Fed board of governors are empty. Trump hasn't been able to find nominees who can - the Senate will confirm. And the terms of the chair and the two vice chairs all end in 2021 or 2022.
GREENE: David Wessel, director of the Hutchins Center at the Brookings Institution, on this Election Day. David, thanks so much.
WESSEL: You're welcome.
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