Authors: Chan Kung and He Jun
With Joe Biden emerging victoriously in the U.S. presidential election, the “Trump Era” that disrupted both the United States and the world is coming to an end. However, the internal changes in American society as reflected in the general election is beyond simple winning or losing. Americans showed great enthusiasm in voting this year, and more than 150 million voters cast their ballot even under the severe COVID-19 outbreak. Biden had received more than 73 million votes, which not only set the highest turnout rate in more than a century, but also the number of voters reached the highest in history. It is worth noting that Donald Trump still has the support of more than 73 million Americans. The public opinion of American society reflected behind the numbers is profound and cannot be ignored.
Many have mistaken American politics to be merely about the Congress, the President, and the Pentagon. The reality is that the foundation of American politics lies not in these places, but in counties. From the perspective of the U.S. electoral process, although Biden is the winner, the whole process was rather “tortuous” as there have been many twists and turns. The process of Biden’s victory, as a matter of fact, was more complicated than previously expected by the ANBOUND research team, and the gap between the two parties was also smaller than what had been previously thought. The fierce competition in this election shows that the degree of mobilization of American society, the degree of organization of social groups, and the degree of high-level participation of various ethnic communities have reached a high level. The superficial polls and data analysis from the media are full of errors and are incapable of reflecting the internal changes in the American society, especially among the grassroots. This year’s election process in Georgia, Arizona, Pennsylvania, Michigan, Wisconsin and other states alternated between blue and red, and finally there was turnaround. The changes of voting pattern in “county politics” played a big part throughout the United States; even in a red state like Texas which primarily consists of Republicans, this trend holds true. With such volatility in election, if “county politics” is ignored, one would not understand the social organization and mobilization of this level, and it will be difficult to have an objective prediction of Trump’s early lead and the subsequent turnaround.
The extremely high voting participation rate in the 2020 U.S. election not only shows the foundation of the American public opinion, but also contains the source of power for American social and economic development in the future. What do these grassroots voters who have been mobilized in large numbers want? How should the Biden administration meet their needs? All these will be related to the future political and economic development of the United States. Researchers at ANBOUND believe that the post-Trump American society is likely to opt for a welfare-oriented transition, which is likely to become an important direction to promote the long-term prosperity of American society and economy.
From both an economic and political economy perspective, the vitality and sustainability of capitalism come from its self-evolution and improvement according to the needs of social development. Generally speaking, when a country’s economy has developed to a considerable extent, the level of social welfare will be improved. Unlike the developed capitalist countries in Europe (mainly Western and Northern European countries), which have generally opted for a high-welfare model, the United States, which favors liberal capitalism, does not have a high level of social welfare. It is staggering that the United States, the world’s major superpower, does not have universal health coverage. That was in fact one of the key reasons why former U.S. President Barack Obama pushed for the Affordable Care Act (commonly known as “Obamacare”).
There is a strong demand to improve welfare in American society. U.S. Senator Bernie Sanders, who has performed brilliantly in the last two U.S. elections, has gained support in the U.S. because of his welfarist ideas, including significantly increasing the level of welfare, reducing health care costs, and promoting social justice. In the capitalist United States, Sanders’ political positions lean toward the “socialism”. During his political career, Sanders has been advocating the establishment of a single-pay medical system for all. His view is that medical services are the basic right of all people, and the United States should, like other industrialized countries, protect this basic right.
Improving the level of welfare is an important means of achieving balanced social development. With the development of technology and the capital market, inequality in American society is increasing. Data show that the wealth of the richest 1% of the U.S. population is US$ 34.2 trillion, which is equivalent to 15 times the wealth of more than half of the U.S. population. Data also show that the wealth of the richest 50 individuals in the United States is equal to the combined wealth of the poorest 165 million individuals in the United States. The Federal Reserve estimates that the richest 10% of U.S. households hold 69% of the nation’s wealth (or US$ 77.3 trillion), up from 60.9% in the late 1980s. An important means to change all this, in addition to adjusting fiscal policy as some economists have suggested, is to increase the level of social welfare so that the public can live a dignified middle-class life.
Figure 1: U.S. National Health Expenditure as a Share of GDP, 1960 – 2021
Source: Centers for Medicare & Medicaid Services
Judging from the situation of the U.S. election, the future U.S. government will face greater pressure to improve the level of social welfare, which will be reflected in several important areas such as health care, education, and consumption. Significant improvements in these areas could lead to greater support among Democrats and Republicans on both sides of the aisle. If the Biden administration were to follow this path of transformation, “Obamacare” would become “Bidencare”. This is determined by grassroots politics in the United States, and a transition to a welfare society is inevitable in the United States.
What are the consequences for the United States to raise its level of welfare? ANBOUND’s research team believes that this will bring a longer period of super-prosperity to the United States. Obviously, not every country can seek super prosperity by raising the level of welfare. To achieve this goal, there must be two conditions that exist simultaneously. The first is to be “rich”, and the second is to produce large-scale welfare consumption. Therefore, to realize the welfare transformation of the United States, a fundamental question is that “where does the money come from”? To answer this in simple terms, there are two sources of money to support the transformation of the welfare system. The first is from the growth of fiscal revenue, such as tax growth through sustained economic development; the second is from the continuous printing of money, i.e. relying on the country to continuously expand credit. For the United States, the former is a conventional approach, and it is an important foundation for supporting the welfare system. However, the speed of relying on tax growth to support the welfare system is too slow, and there are difficulties in meeting the huge needs of the United States for the transition to welfare in the short term. The latter is what the United States has been doing after the financial crisis in recent years, i.e. expanding credit through continuous printing of money and expanding debt to support current spending needs. This approach in the United States has, to a certain extent, already possessed the characteristics of modern monetary theory (MMT) that fiscal expenditure precedes revenue and fiscal deficits are not restricted.
However, whether under the conventional fiscal and monetary theory or under the MMT, the increase in government debt and fiscal deficit is accompanied by credit expansion, and the continuously expanding credit requires a huge market to digest and cooperate, and a country’s welfare transformation should provide huge “market” for welfare consumption. Among countries in the world, based on the credit as a major power and the strong dollar system, the United States has the ability to support the transition to welfare-oriented through continuous expansion of credit. If this mechanism runs smoothly, it will bring about a huge change in American society and may usher in a period of super prosperity in the United States.
For the United States, welfare improvements in the following three areas are likely to bring significant results.
The first is medical security. The United States spends hugely in the medical field but lacks universal coverage. Data reveal that from 1996 to 2013, the U.S. medical and health expenditure soared by US$ 900 billion. In 2013, the total U.S. medical and health expenditure reached US$ 2.1 trillion; in 2018, it was approximately US$ 3 trillion. Now, this figure may have exceeded US$ 3.2 trillion, equivalent to 18% of the total U.S. economy. If the coverage of medical insurance is expanded and universal medical insurance is achieved, the medical expenditure in the United States would reach US$ 5 trillion. Using this to calculate medical consumption, a huge national healthcare consumer market will emerge in the United States. Currently, the annual education expenditure of all levels of government in the United States exceeds US$ 1.2 trillion. The second is the education. Since 1980, the proportion of U.S. education expenditure to GDP has been relatively stable at more than 5%. Although the U.S. government’s allocation in education is high, American college students still need to pay high tuition fees and have to bear the burden of education loans. So far, the balance of student loans in the United States is approximately US$ 1.5 trillion, surpassing auto and credit card debt, and second only to housing debt. It can be seen that the education sector is also an important area of welfare transformation; rough estimation shows that its scale is more than US$ 2 trillion. The third is the consumption. The United States is a major consumer market. An increase in welfare supply equals an increase in wages, which is the basis for consumption growth. Nationally, in 2018, the consumption expenditure of U.S. households was US$ 14.14 trillion, which was divided into two parts, namely consumer goods and services. The former accounted for 35%, and the total household consumption expenditure reached US$ 4.94 trillion; the latter accounted for 65%, and the total household consumption expenditure reached US$ 9.19 trillion. If only healthcare is considered, the healthcare consumption expenditure of American households a year amounts to US$ 2.4 trillion.
Based on the above three areas, if the United States fully implements welfare transformation, it will create a super consumer market of nearly US$ 10 trillion. It should be noted that this US $10 trillion market scale is not created out of thin air by the Fed through money-printing, but rather the economic development of the United States itself has provided sufficient support for this market. At the same time, the situation where unlimited money issuance in the United States can be maintained before the status quo of the United States’ national capabilities and national credit, and the U.S. dollar system are being truly threatened. This signifies that a system reform can indeed create a huge market. It is entirely possible for the United States to achieve prosperity for a long period of time through welfare transformation, and the United States will usher in a “super-boom period.”
Final analysis conclusion:
The post-election United States is likely to transit to become welfare-oriented, which will create a huge market and maintain a period of prosperity for a long time.