Biden’s Economic Legacy Under a Trump Presidency

Summary

WSJ What’s News: Episode Summary Title: Biden’s Economic Legacy Under a Trump Presidency
Host/Author: The Wall Street Journal
Release Date: December 30, 2024

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1. Trump Endorses Mike Johnson for House Speaker

Timestamp: [00:28] – [03:35]

In the opening segment, host Alex Osola announces that President-elect Donald Trump has endorsed House Speaker Mike Johnson for another term. This endorsement comes amidst internal pressures within the Republican Party, with some members advocating for new leadership.

Key Insights:

• Dependence on Trump’s Support: Lindsay Wise, a Wall Street Journal reporter covering Congress, explains the significance of Trump's endorsement for Johnson. “He’s very dependent on Trump's support as speaker” ([01:21]).

• Challenges Ahead: Despite the endorsement, Johnson faces a narrow Republican majority of 219-215 in the House. One dissenting vote from Kentucky's Thomas Massie adds to the uncertainty. Wise notes, “Johnson has to hold every single other member of his 219 majority in check” ([02:49]).

• Implications for Power Transfer: There’s a strategic consideration regarding the certification of Trump’s Electoral College victory scheduled for January 6th. Wise emphasizes the importance of a smooth speaker election to avoid delays in power transfer ([01:21]).

2. Record ETF Investments in 2024

Timestamp: [03:40] – [05:02]

Alex Osola highlights a significant milestone in the investment world, with investors pouring over $1 trillion into U.S.-based exchange-traded funds (ETFs) in 2024, surpassing the previous record set three years prior.

Key Points:

• Surge in ETF Assets: Total assets in U.S. ETFs reached $10.6 trillion by the end of November, marking a 30% increase from the start of the year ([03:40]).

• Market Performance: The robust inflow correlates with the S&P 500’s impressive year-end gain of approximately 25%, signaling strong investor confidence despite recent market volatility.

3. Market Movements and Global Developments

Timestamp: [05:02] – [07:37]

The discussion transitions to market fluctuations and international news.

Highlights:

• Tech Sector Downturn: A tech sell-off led major U.S. indices to decline, with the NASDAQ dropping about 1.2% and the Dow and S&P 500 each closing down approximately 1% ([05:02]).

• Syria’s Central Bank Leadership: Syria’s new rulers have appointed Maisa Sabrin, a former first deputy governor, as the head of the central bank in Damascu, marking a significant move towards gender inclusion in senior financial roles ([05:02]).

4. Biden’s Economic Legacy Under a Trump Presidency

Timestamp: [05:35] – [12:20]

The core of the episode delves into President Biden's economic legacy and how it may endure or be altered under Trump's forthcoming administration. Greg IP, Wall Street Journal’s chief economics commentator, and Lindsay Wise discuss the interplay between Biden's policies and Trump's anticipated actions.

Key Discussions:

• Biden’s Economic Achievements:

  • Macroeconomic Policies: Biden’s administration implemented the American Rescue Plan, injecting $2 trillion into the economy. Wise remarks, “It probably is one of the reasons job growth and economic growth were as strong as they were” ([06:19]).
  • Microeconomic Initiatives: Significant legislation includes the Bipartisan Infrastructure Act, the CHIPS and Science Act, and the Inflation Reduction Act. These laws represent substantial federal intervention in the private sector, particularly in renewable energy and semiconductor industries ([06:37]).

• Impact of Trump’s Policies:

  • Criticism of the Inflation Reduction Act: Trump has criticized the Act as a misallocation of taxpayer money. IP notes, “They believe it's been a waste of taxpayer money in pursuit of a set of technologies which consumers just don't want” ([07:37]).
  • Infrastructure and CHIPS Acts: While infrastructure funding enjoys bipartisan support, Trump’s stance on the CHIPS Act is nuanced. He prefers tariffs over subsidies for domestic semiconductor production, though existing contracts make rollback challenging ([08:07]).

• Potential Policy Shifts:

  • Tariffs and Tax Cuts: Trump is expected to implement higher tariffs, especially targeting Canada and Mexico, and pursue further tax cuts to stimulate growth. “He has already put out social media posts promising tariffs on day one against Canada and Mexico” ([10:37]).
  • Regulatory Changes: Emphasis on reducing federal regulations to promote business growth is a cornerstone of Trump’s economic strategy ([10:29]).

• Economic Projections:

  • Growth Expectations: Economists anticipate the U.S. economy to grow by slightly over 2% in the upcoming year. However, if Trump proceeds with aggressive tariffs or immigration policies, there could be negative repercussions. Wise suggests, “My starting assumption would be that the first year of Trump's term will be a very good year for the economy” unless significant policy deviations occur ([11:56]).

Notable Quotes:

• Lindsay Wise: “Johnson has very little margin for error” ([02:49]).
• Greg IP: “They definitely represented an important vision that will distinguish Biden's economic legacy from his predecessors” ([07:18]).
• Lindsay Wise: “Funding certain projects, the administration still has to implement them” ([09:45]).

Conclusion

President-elect Donald Trump faces the challenge of navigating and potentially reshaping the robust economic framework left by President Biden. While Biden’s policies have created a strong foundation in job growth and infrastructure, Trump's proposed shifts towards higher tariffs, reduced regulation, and tax cuts could significantly influence the U.S. economy’s trajectory in the coming year. The narrow Republican majority further complicates the implementation of Trump’s agenda, making the next steps critical for both political stability and economic performance.

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Produced by Pierre Bienname with Supervising Producer Michael Kosmides. For more insights, subscribe to WSJ What’s News.

Transcript

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[Alex Osola]

President elect Donald Trump endorses House Speaker Mike Johnson Johnson for another term and how Biden's economic legacy might fare under the Trump administration.

[Greg IP]

The burden of trying to be realistic about what this country can afford may affect the extent to which Trump and.

[Lindsay Wise]

The Congress can actually deliver on the.

[Greg IP]

Things that he promised.

[Alex Osola]

Plus, investors have poured a record $1 trillion into U.S. exchange traded funds. It's Monday, December 30th. I'm Alex Osila for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the Donald Trump has endorsed House Speaker Mike Johnson for another term amid rumblings from some Republicans who say the party should seek a new leader in the House. Lindsay Wise covers Congress for the Wall Street Journal and joins us now to talk about what this means for Republicans. Lindsey, what does Trump's endorsement actually mean here?

[Lindsay Wise]

Well, this is a big deal for Mike Johnson. He's very dependent on Trump's support as speaker. We know that Trump was a bit annoyed with how Johnson handled the recent spending bill that came through Congress. Trump had wanted an increase to the nation's borrowing limit as part of that vote, and it didn't happen. So we know that Trump was a little grumpy about that, but it appears that he is not really holding that against Johnson right now. It's very interesting that this is coming now. It wasn't unexpected. However, one of the things that may be in Trump's thinking here, and I know is in the thinking of some members of Congress, is that the House can't swear in any new members or conduct any business form any committees, pass any legislation until a speaker is elected. And that also includes certification of Trump's Electoral College victory. And that is scheduled under statute for January 6th. So I think it may be also in the minds of many Republicans on the Hill that if they have a long, protracted battle over who is elected speaker, that could really create some uncertainty about the transfer of power and Trump's certification. So I think that there's a lot of interest in making sure that this goes smoothly, that it doesn't take as long as it did previously.

[Alex Osola]

Considering the tight margins in the House. And you know, the Republicans who have already vowed to oppose Johnson and some who say they're undecided, I mean, does this boost his chances of keeping his position?

[Lindsay Wise]

It definitely helps. He has very little margin for error. A candidate for speaker has to win support from a majority of all House members elect who are present in voting. And the Republicans are expected to have a very narrow 219 to 215 majority. The problem that that creates for Johnson is that he can't afford to lose really any more than one member voting for a different candidate. And he's already got one member who said he's going to vote for someone else. That's Thomas Massie of Kentucky. So at this point, Johnson has to hold every single other member of his 219 majority in check in order to win this speakership gavel. And even with Trump's support, that is a tall order.

[Alex Osola]

That was Wall Street Journal reporter Lindsay Wise. Lindsey, thank you so much.

[Lindsay Wise]

Thanks.

[Alex Osola]

Investors poured more than $1 trillion into US based exchange traded funds in 2024, shattering the previous record set three years ago and raising Wall street hopes for an even bigger year ahead. According to data from consulting firm ETF GI, total assets in US based ETFs reached a record $10.6 trillion at the end of November, an increase of more than 30% from the start of 2024. Analysts said that the rebound from last year's lackluster flows marked a broad embrace of U.S. assets in a year in which the S&P 500 gained about 25% a year end. Tech sell off rattled U.S. markets for a second straight session today. Major U.S. indexes slumped, with the tech heavy NASDAQ leading declines down about 1.2%. The Dow and the S&P 500 closed down about 1%. Syria's new rulers have appointed a woman to run the country's central bank. Maisa Sabrin, a former first deputy governor at the central bank, will be the first woman in that top job and one of few women named to a senior role by the former rebels now in control in Damasc. Coming up, how much of Biden's economic legacy will survive Trump's presidency? That's after the break.

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[Alex Osola]

President elect Donald Trump is inheriting a thriving and growing economy from outgoing President Joe Biden. But Trump has plans of his own, and it could put the economy in a very different place a year from now. Wall Street Journal chief economics commentator Greg IP is here to talk about how a Trump presidency might interact with or und Biden's economic legacy. Greg, let's start with where we are now. Biden has left an economy strong on jobs and growth, but not so much when it comes to inflation. Which of the policies or elements of the economy under Joe Biden will continue to have an impact into the future?

[Greg IP]

You could think of Joe Biden's economic.

[Lindsay Wise]

Policies on the macro front and the micro front.

[Greg IP]

By the macro front, I mean he obviously signed into law the American rescue plan in his first few months in.

[Lindsay Wise]

Office, which injected $2 trillion of relief into the economy.

[Greg IP]

Was that a good thing?

[Lindsay Wise]

Well, partly. It depends on how you measure it. It probably is one of the reasons.

[Greg IP]

That job growth and economic growth were.

[Lindsay Wise]

As strong as they were in the.

[Greg IP]

United States, but it was also one.

[Lindsay Wise]

Of the reasons that inflation was as.

[Greg IP]

High as it was. So definitely a mixed bag. Now, if you go to the micro.

[Lindsay Wise]

Front, he signed into law a series of initiatives which really were quite consequential.

[Greg IP]

The Bipartisan Infrastructure act, the Chips and.

[Lindsay Wise]

Science act, and the Inflation Reduction Act.

[Greg IP]

Now, that final one was kind of a misnomer. It was really more important because it basically directed a lot of subsidies and tax cred towards renewable energy. And these three laws collectively represented the.

[Lindsay Wise]

Biggest federal intervention in the private economy in generations. It's way too early to say just how lasting and consequential these laws will.

[Greg IP]

Be or even whether they will persist, but they definitely represented an important vision that will distinguish Biden's economic legacy from his predecessors.

So of course Biden will leave office. Donald Trump will be inaugurated in January. And if we're just taking the things that you just mentioned, infrastructure, infrastructure, semiconductors, renewables, what do we know about where he stands on those things? Are there any of those that he plans to continue to invest in or roll back investment immediately?

Well, he's had a variety of views on some of these, and it's not always clear exactly where he's going to end up. He and the people around him have been extremely critical of the Inflation Reduction Act. They believe it's been a waste of taxpayer money in pursuit of a set of technologies which consumers just don't want. So he and his administration will no doubt look for ways to roll back some of those programs. Now, that won't be done that easily because they were enshrined in law. On the infrastructure law, it's pretty popular now.

[Lindsay Wise]

You can make some legitimate criticisms of.

[Greg IP]

That law, which is that it has been taking a painfully long time to actually build some of the infrastructure that's.

[Lindsay Wise]

Supposed to be funded.

[Greg IP]

But that said, you don't hear a lot of demands that it be undone, because, frankly, infrastructure is popular among Republic Republicans and Democrats.

[Lindsay Wise]

Now, on the CHIPS act, which is.

[Greg IP]

The one that's meant to support semiconductors, this one's a little bit complicated. President Trump is on record as saying he didn't think it was a very good idea to basically advance billions of dollars to companies like Taiwan Semiconductor or Samsung to build factories here. Why not just impose tariffs on them.

[Lindsay Wise]

To force them to make their chips here?

[Greg IP]

Trump said.

[Lindsay Wise]

So does that mean he will try.

[Greg IP]

And find ways to undo that? A lot of that money has now.

[Lindsay Wise]

Been sort of enshrined in contracts between.

[Greg IP]

The federal government and these companies. And short of going to court, I don't know how a Trump administration could undo those contracts.

[Lindsay Wise]

But the other aspect is that these investments are pretty popular, including among Republicans.

[Greg IP]

And finally, there's a bipartisan recognition that US Leadership in advanced semiconductors is critical to economic and national security. This is not a field where you want the Chinese to basically leave the United States behind. So I think ultimately that will survive.

Is there a future in which the.

[Alex Osola]

Trump administration simply decides to defund some.

[Greg IP]

Of these projects, even if it's politically unpopular, in an effort to roll back government spending, federal regulation? And these policies do end up getting reversed, practically.

[Lindsay Wise]

Oh, very much so.

[Greg IP]

I mean, even when Congress passes laws.

[Lindsay Wise]

Funding certain projects, the administration still has to implement them.

[Greg IP]

And there are many points in that process where administration officials appointed by President.

[Lindsay Wise]

Trump could raise roadblocks or say that.

[Greg IP]

The criteria has not been met. There's enormous discretion on the parts of.

[Lindsay Wise]

Presidents to either speed up or slow.

[Greg IP]

Down or otherwise fiddle with programs that their predecessors implemented.

[Lindsay Wise]

So in my view, whether these programs continue and their original goals are met.

[Greg IP]

Will not come down to so much the letter of the law, but the will on the part of both parties in Congress to see them continue.

I mentioned some of the things that we've heard from President Elect Donald Trump. Higher tariffs, cutting taxes, less regulation what are some of the actions we could expect him to take kind of early in his tenure to establish his economic policy?

Well, Trump campaigned on two broad principles.

[Lindsay Wise]

The first was less regulation and lower.

[Greg IP]

Taxes to promote growth and higher tariffs to promote local production and reduce the trade deficit.

[Lindsay Wise]

So he has already put out social media posts promising tariffs on day one against Canada and Mexico.

[Greg IP]

So we could see that very soon. And from his point of view, one.

[Lindsay Wise]

Of the benefits of tariff action is.

[Greg IP]

That he doesn't need Congress to act on taxes. That's going to be a long and much more complicated process because it is something where Congress has to act and they have already got their plate full. Because the tax cut that Republicans and Trump brought into law in 2017, big parts of it expire at the end of 2025.

[Lindsay Wise]

So a lot of the early months of Trump's presidency will be consumed with trying to find ways to extend that.

[Greg IP]

Law and then adding to or adjusting provisions of that law according to the various promises that Trump made on the campaign trail.

[Lindsay Wise]

And quite frankly, those promises are very expensive, and they come at a time.

[Greg IP]

When the US Is already running budget.

[Lindsay Wise]

Deficits that are unprecedented for a country.

[Greg IP]

That is not at war or in a recession or in an emergency. So the burden of trying to be realistic about what this country can afford may affect the extent to which Trump.

[Lindsay Wise]

And the Congress can actually deliver on.

[Greg IP]

The things that he promised.

If Trump does some of the things that he's promised in the next year or so, sounds like it's going to be a busy year for him. What might the economy look like a year from now?

[Lindsay Wise]

Most economists thought the economy would grow.

[Greg IP]

Around a little over 2% next year.

[Lindsay Wise]

Now, if you look at how strong.

[Greg IP]

The stock market has been since Election Day, there's a lot of excitement in the business community and investor community. So there's a good chance growth will be stronger than the 2% that people have been expecting. Now, if Trump goes ahead with his plan on tariffs or his plan to deport millions of people, that would tend.

[Lindsay Wise]

To take away from economic growth.

[Greg IP]

But since those things are very uncertain.

[Lindsay Wise]

My starting assumption would be that the.

[Greg IP]

First year of Trump's term will be a very good year for the economy.

Greg, thank you so much. See you in 2025.

All right, thanks. We'll see you, too.

[Alex Osola]

And that's what's news for this Monday afternoon. Today's show was produced by Pierre Bienname with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new single show tomorrow at midday. Thanks for listening.