WSJ What’s News - Biden’s Economic Legacy Under a Trump Presidency

Episode Date: December 30, 2024

P.M. Edition for Dec. 30. As Joe Biden’s presidency draws to a close, WSJ chief economics commentator Greg Ip discusses what of his economic policy could last into—or be undone by—President-elect Donald Trump. And Trump has endorsed House Speaker Mike Johnson for another term. Wall Street Journal reporter Lindsay Wise talks about what that means for Johnson’s prospects. Plus, investors have poured more than $1 trillion into U.S. exchange-traded funds, or ETFs, in 2024. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Snakes, zombies, public speaking, the list of fears is endless. But the real danger is in your hand when you're behind the wheel. Distracted driving is what's really scary and even deadly. Eyes forward, don't drive distracted. Brought to you by NHTSA and the Ad Council. President-elect Donald Trump endorses House Speaker Mike Johnson for another term. And how Biden's economic legacy might fare under the Trump administration.

The burden of trying to be realistic about what this country can afford may affect the extent to which Trump and the Congress can actually deliver on the things that he promised. Plus, investors have poured a record $1 trillion into U.S. exchange-traded funds. It's Monday, December 30th. I'm Alex Osceola for The Wall Street Journal. This is the PM funds. It's Monday, December 30th. I'm Alex Osala for The Wall

Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. 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. Lindsey Wise covers Congress for the Wall Street Journal and joins us now to talk about what this means for Republicans. Lindsay, what does Trump's endorsement actually mean here?

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 6.

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. Considering the tight margins in the House and 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?

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 and 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 Massey 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. That was Wall Street Journal reporter, Lindsay Wise. Lindsay, thank you so much. Thanks. Investors poured more than one trillion dollars into U.S.-based exchange traded funds in 2024, shattering the previous records set three years ago and raising Wall Street hopes for an

even bigger year ahead. According to data from consulting firm ETFGI, 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 US assets in a year in which the S&P 500 gained about 25%.

A year-end tech selloff rattled US markets for a second straight session today. Major US 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. Micea 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 Damascus. Coming up, how much of Biden's economic legacy will survive Trump's presidency? That's after the break. This episode is brought to you by HelloFresh. Be honest, between meetings, workout classes,

and the kids' clubs, who's got time to cook? That's where HelloFresh comes in. No matter how busy you get, HelloFresh makes it easy to get a home-cooked meal on the table. With flavor-packed recipes like crispy chicken parmigiana, you'll be filling your kitchen with the cozy aromas of a homemade meal in no time. Visit HelloFresh.ca and use code SPOTIFY for your exclusive offer. 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 undo 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? You could think of Joe Biden's economic policies on the macro

front and the micro front. By the macro front, I mean he obviously signed into law the American Rescue Plan in his first few months in office which injected two trillion dollars of relief into the economy. Was that a good thing? Well, partly depends on how you measure it. It probably is one of the reasons that job growth and economic growth were as strong as they were in the United States, but it was also one of the reasons that inflation was as high as it was. So definitely a mixed bag.

Now if you go to the micro front, he signed into law a series of initiatives which really were quite consequential. The Bipartisan Infrastructure Act, the Chips and Science Act, and the Inflation Reduction Act. Now that final one was kind of a misnomer. It was really more important because it basically directed a lot of subsidies and tax credits towards renewable energy. And these three laws collectively represented the biggest federal intervention in the private economy in generations. It's way too early to say just how lasting and consequential these laws will 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, 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.

So 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 you can make some legitimate criticisms of that law, which is that it has been taking like painfully long time to actually build some of the infrastructure that's supposed to be funded. But that said, you don't hear a lot of demands that it be undone because frankly, infrastructure is popular among Republicans and Democrats.

Now, on the CHIPS Act, which is the one that's meant to support semiconductors, this one's a little bit complicated. President Trump is on record 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 to force them to make their chips here, Trump said. So does that mean he will try and find ways to undo that?

A lot of that money has now been sort of enshrined in contracts between the federal government and these companies. And short of going to court, I don't know how a Trump administration could undo those contracts. But the other aspect is that these investments are pretty popular, including among Republicans. And finally there's a bipartisan recognition that US leadership and 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.

COLLEEN O'BRIEN Is there a future in which the Trump administration simply decides to defund some 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. Oh, very much so. I mean, even when Congress passes laws funding certain projects, the administration still has to implement them. And there are many points in that process where administration officials appointed

by President Trump could raise roadblocks or say that the criteria has not been met. There's enormous discretion on the parts of presidents to either speed up or slow down or otherwise fiddle with programs that their predecessors implemented. So in my view, whether these programs continue and their original goals are met 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. The first was less regulation and lower taxes to promote growth and higher tariffs to promote local production and reduce

the trade deficit. So he has already put out social media posts promising tariffs on day one against Canada and Mexico. So we could see that very soon. And from his point of view, one of the benefits of tariff action is 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. So a lot of the early months of Trump's presidency will be consumed with trying to find ways to extend that law and then adding to or adjusting provisions of that law according to the various promises that Trump made on the campaign trail. And quite frankly those promises are very expensive and they come at a time when the US is already running budget deficits that are unprecedented for a country that is not at war or in a recession or an emergency. So the burden of trying to be realistic about what this country can afford may affect the extent to which Trump and the Congress can actually deliver on 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? Most economists thought the economy would grow around a little over 2% next year. Now, if you look at how strong 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 to take away from economic growth. But since those things are very uncertain, my starting assumption would be that the 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. And that's what's news for this Monday afternoon. Today's show was produced by Pierre Bienneme with supervising producer Michael Kosmitis. I'm Alex Osala for The Wall Street Journal. We'll be back with a new single show tomorrow at midday. Thanks for listening.