America, Are we going to see An Economic repeat of the Fall of the Great Roman Empire, Part 2.

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Part 1 of the series focused primarily on the past – current situation in America however now in the 2nd part of the series the future effect to America and how Americas’ downfall will match the Roman Empire we must first identify the factor that makes most great thing fail.

Irrational exuberance, by definition it is the unfounded market optimism that lacks any real fundamental valuation or logical reasoning but on psychological factors i.e. previous strength of the market. In the case of the Great Roman Empire the traditional strength of the Great Roman Empire made the citizens of said Empire completely oblivious to the ongoing threats of external factors as well as the internal turmoil of the Empire. A similar situation has now arisen in America, due to Americas’ current economic uncertainty because of corona and without a vaccine, economic suicide is essentially the only current method of removing coronavirus thus preventing coronavirus as a short-term issue prevention however the long-term ramifications could essentially lead to the collapse of the American Economy, or at the very least the failings of the economy as an economic global superpower.

The whole premise of this argument relies on the political division of America and although this wasn’t one of my aforementioned factors the current political climate is really an indicator on the validity of my thesis. Especially, in the case of Joe Biden, if he is election the shift of focus away from economics stabilisation of America and restoration of its economic strength would really emphasise and accentuate my thesis.The prospect of Bidenomics has a certain stress on it due to the circumstances he may potentially enter the Oval Office under. Bidenomics faces one of the greatest challenges to any American president, the Economist published a riveting article on the prospect of Bidenomics and how it wouldn’t be able to remake America’s economy thus not improving the future of America economically.

American Economy really came back to life post lock down restrictions termination in May, with Gross domestic Product soaring at an annual pace of 33.1% in months July, August and September, but this was all under the rule of Trump, not only does the resurgence of coronavirus pose a serious threat to the stability of Americas’ economy but the US economy is still 3.5% smaller than at the end of 2019 and although proportionally that may seem minimal, by putting that into perspective that surmounts to circa $700 billion in economic activity. Moreover, the prospects for the last 3 months are not proving as prolific expert estimates stating only a 3% increase for the last 3 months of 2020.

The extent of Americas’ recovery must not be evaluated next to Bidens’ policy, analysts at Moodys’ have projected the information stated in the graph below. Mow objectively, this seems like quite a profitable economic venture and would lead to a stronger performace than recent years but is the projection actually accurate?

Moodys’ Projection for Bidenomics’ Impac on American GDP

In short, I belief the answer is no. Bidens’ stance on increased spending on education, healthcare and social security and the social safety net would lead to an additional increase in government spendings of estimation : $7tn projection by Moodys’ over the 3 years to 2024 and considering the current economic climate that money could be detrimental especially considering the nature of the spending, although that is really a separate topic altogether.

With the election of Biden comes many controversial and interesting questions of the future of the Biden administration the most potent concerning the emergence of Biden in such a problematic time in American history means that the strain on Biden will be much higher than many previous presidents and the economics turmoil really directs all pressure towards Biden as when people are suffering economically it really exacerbates all of their other problems thus Bidens’ choice of presidential election potentially, couldn’t be worse however if his spending policies rejuvenate the American economy then the opposite could be argued and Biden could be deemed an American hero.

To conclude on the impact on America and how this may indeed lead to Americas’ economic down fall we will examine the impact of Bidens’ key economic policies.The former vice president has said he will pay for the measures with about $4 trillion in tax increases on corporations, investments and wealthy Americans. That includes an overhaul of President Trump’s massive $1.5 trillion Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21% from 35% and temporarily reduced individual income taxes. The transition away from business prosperity to resource the economy would reult in a lack of investment in the US economy even post “recovery stages” as the returns will be much lower than both expected and desired and the increase in corporate tax will also limit internal investment due to less profits thus by capping business growth which is a pivotal part of any recovery process thus perhaps economically speaking the policys’ won’t benefit America.

However, conversely, the outreach of the increased spending will increase the overall welfare and lower the Gini coefficient which is evidently the more required solution so a counter-thesis could in fact be that America as a whole will choose to sacrifice its’ economic standing to benefit those worst impacted by the coronavirus and due to coronavirus limiting the manual labourers(working class) more than the providers of services(middle and often upper classes) this means indirectly working to fight inequality.


References

  1. /https://www.foxbusiness.com/politics/joe-biden-proposes-7-trillion-in-spending

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