According to conventional wisdom, US President-elect Biden will find himself immediately paralyzed because Republicans will follow the same obstructionist playbook they used to sabotage Barack Obama’s administration. But there are five new features of US political dynamics that this argument has overlooked.
LONDON – The US election has passed without any big surprises, and the enthusiastic reaction in global financial markets has been exactly what any economics textbook would predict if a predictable, conventional centrist replaced an erratic, extremist populist as US president. Beyond investor psychology, there are several fundamental reasons that justify a Biden rally: the near-certainty of further fiscal stimulus in the short term; the high probability of pro-growth Keynesian demand management in the medium term; and the possibility of a global investment boom in new energy and transport technologies in the long term.
Yet most investors, economists and political pundits are skeptical about all these possibilities because of the Democrats’ failure to retake control of the Senate. According to conventional wisdom, Biden will find himself immediately paralyzed because Republicans will follow the same playbook they used to sabotage Barack Obama’s administration. After winning a House majority in 2010, Speaker John Boehner blocked almost all legislation, turning Obama into a lame-duck president for six of his eight years in office. Now the Senate, under GOP control since the 2014 midterm election, will again create gridlock and prevent pandemic relief, block fiscal expansion, and thwart new investment in energy or infrastructure.
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