SALT LAKE CITY — Ahead of the inauguration of President-elect Joe Biden, the business sector has mixed feelings about the potential policies his administration could bring as he enters the White House. His promise to raise corporate taxes has been criticized, but his commitment to sustainable infrastructure could greatly stimulate the economy.
To Derek Miller, president and CEO of the Salt Lake Chamber and Downtown Alliance, the most important thing Biden can do for the economy is simple: fight the novel coronavirus.
"Really, as it relates to how the Biden administration will have an impact on both the national economy as well as Utah's economy has everything to do, in the short term, with how they do it at combating the virus and getting through this pandemic," he said.
As the new administration prepares to take office in a few short weeks, here's a look into a few potential policies that could bring a significant impact to Utah's economy and business community.
Utah's economy was booming before COVID-19 — the state had the fastest job growth in the nation, the most diverse and strongest economy, and was ranked as one of the best places to do business, according to Miller.
The pandemic has taken its toll on the nation's economy and brought a devastating impact to small businesses, which make up more than 90% of Utah's businesses, Miller said.
The Beehive State, however, has been outperforming the nation when it comes to economic recovery, according to Natalie Gochnour, an economist and director of the University of Utah's Kem C. Gardner Institute.
"Right now our unemployment rate is at 4.3%, compared to a national unemployment rate of 6.7%," she explained. "We're getting through this better than most states; still contracting, still very difficult, very uneven hurting some people more than others, but on the whole, the Utah economy has been relatively strong."
While the state has already begun to recover, business won't return to normal as long as the pandemic continues to surge. Even with vaccine distribution rolling out, COVID-19 cases continue to rise across the United States. So, how will Biden handle the inherited pandemic?
On the campaign trail, President Donald Trump told his supporters a Biden administration would bring widespread shutdowns as part of the federal COVID-19 response, but Biden pushed back against the rhetoric and said he will not "shut down the economy, period."
"I'm going to shut down the virus. That's what I'm going to shut down," Biden said at a November press conference. "There is no circumstance which I can see that would require a total national shutdown. I think that would be counterproductive."
Biden acknowledged each area of the country is different and appropriate measures need to be taken depending on how widespread the virus is in the various states. He noted, as an example, that it's important to have constraints on how much businesses can be open, including capacity requirements. In addition to supporting the economy in his response, Biden has said he will put an emphasis on mask-wearing and increased testing.
"There is no question that COVID-19 and this ongoing pandemic is the greatest risk to the economy," Gochnour added.
Raising corporate taxes
There is one thing that experts say could potentially hurt the economy: Biden's promise to reverse Trump's corporate tax cuts and raise taxes from 21% to 28%. He also plans to impose a 15% minimum tax, "so that no corporation gets away with paying no taxes," his campaign website reads. He also plans to increase taxes for anyone making more than $400,000 per year, while promising tax cuts for the middle class.
"I think there's a lot of things that the president should be focused on to help the economy, and I do not think a corporate tax increase at this point in time would be warranted," Gochnour said.
Those working in the business sector find the potential tax increase unhelpful as well.
"That, of course, would be not just unwelcome from the business community, but it would actually hurt a burgeoning economic revival," Miller said.
Instead of raising corporate taxes, Gochnour thinks Biden should focus on his responsibility to restore confidence in Washington — something she said is greatly needed at this time.
"(Restoring confidence in D.C.) would require that there be a lot of common ground and predictability shared with the American public and with people who view the economy differently than he does," she explained. "I think the tangible ways to restore confidence will be to have a broad base governance model that involves many people from different points of view and to see compromise with his partners on Capitol Hill."
While detractors say Biden's tax plan won't help the economy, especially during a pandemic, Biden claims his administration is committed to helping struggling small businesses recover from the pandemic. In addition to tax hikes, Biden's "Build Back Better" plan includes $400 billion to "tackle inequities in the federal contracting system."
"It would be good for the Biden administration, when they talk about focusing on small businesses, to make sure that it's focused on those businesses that were hit first. They were hit the hardest and their recovery is going to be the longest," Miller said.
In addition to potential tax increases, Biden said he will combat corporate power by enforcing laws and regulations in place to keep them in check.
"Regulation is obviously important to business, like most things in life, and always requires a balance," Miller said. "Businesses, in general, are supportive of regulation in so far that it provides a level playing field. That's important to weed out the bad actors and to support and reward the good actors, whatever the industry is. But we always have to be careful that it doesn't become overburdened by some regulation."
Regardless of the other aspects to the plan, Miller said it will hurt the economy if Biden ends up increasing corporate taxes.
"Raising taxes on businesses just means that consumers are paying more and it gives the business less opportunity to create more jobs, and so that's a misplaced campaign promise," he said. "I hope that he'll understand that would really be a detriment to the economic revival that we're just beginning to experience and we certainly need to encourage."
Investing in infrastructure
Instead of raising taxes, Miller said Biden should support investing in the country's infrastructure, a bipartisan action the business community would support.
"It's one of those rare items that both Democrats and Republicans agree on," Miller said. "(There's) a ... recognition that if you put the right infrastructure into place, that it accelerates economic growth."
According to his campaign website, Biden is committed to building a "more resilient, sustainable economy – one that will put the United States on an irreversible path to achieve net-zero emissions, economywide, by no later than 2050."
Utah provides the perfect example of large economic growth after infrastructure was put into place, Miller said, referencing the historic driving of the Golden Spike and the transcontinental railroad.
"Time is of the essence to get our roads and our bridges back up to where they need to be, and I would say there's an opportunity for additional infrastructure," Miller said. "It would be a great boon to this country to see more electric vehicle infrastructure put into place across the country to put in clean energy infrastructure. And it'd be good all the way around — good for the environment and good for the economy."
While infrastructure investment would help the economy and create jobs, Gochnour said it comes with a challenge: the huge national deficit.
"I think it would be, on whole, a positive for the economy to invest in infrastructure, but it's got to be done in a way that also keeps government spending in check," she said.
In addition to infrastructure, Miller said there is another thing the Biden administration could bring that would be welcome: stability.
"The first thing that he should do would be to bring more predictability and stability to international trade; that's been an area that has suffered under the Trump administration," Miller said.
Mainstream economists widely agree that open markets are good for the nation's economy in the long run, Gochnour added.
"Trade wars and barriers to trade are not helpful," she added. "I would expect this to be one of the policies of the administration that will be helpful for the economy — to re-engage with global markets in a way that has less friction."
In November, Biden said the U.S. and its allies need to establish global trading perimeters to address China's growing influence, Reuters reported. He also plans to discuss a detailed trade plan on his second day in office.
Miller felt Trump had the right idea when he asserted trade deals should be fair but said the so-called trade wars caused a lot of uncertainty in the market.
"One thing that all businesses of any size really crave is predictability and certainty. And it took the Trump administration too long to put new trade deals into place. That hurt Utah businesses because Utah is one of the nation's largest exporting states," he said. "I would hope that, for the sake of Utah small businesses the Biden administration would emphasize the fact that they want to have these free and fair trade deals," he added.
Once the country comes out of the pandemic, Miller said the Biden administration needs to address the growing national debt "and the impact that it will have on the future of our country." While the national debt needs to be addressed eventually, doing so in the middle of a widespread health and economic crisis is not the time, Gochnour added.
"The Biden administration needs to stay focused on getting this economy back on track and protecting public health," she said, while noting that plans can be put into place to address deficit reduction once the ongoing pandemic is under control.
"You can't do it right now. We've got to spend right now," she said. "But, you can have a plan in place that you can address the debt once we're on the other side of this crisis.
Biden's economic plan does not directly address the national deficit, but an increase in government spending in programs he says will help the economy long-term.
Once the economy stabilizes, drastic measures need to be taken to address the growing national debt, Miller emphasized.
"I think, as a country and the Biden administration and Congress, (we) really need to start paying more attention to the level of our of our debt and how to get that under control, because that's probably going to become the greatest long-term risk we have to our continued economic prosperity."