Recent polls indicate that President Biden is trailing former President Trump. A poll released by CNN shows Trump leading nationally by 49% to 43% but this seems to be an outlier.
The RealClearPolitics average of the polls point to a close race with Trump at 46.6% and Biden at 45.3%.
At issue is a low approval rating for the current President. According to Gallup, he is the least popular president at this stage in his first term in 70 years with just 38.7% job approval.
The next lowest reading belonged to George H. W. Bush, at 41.8% who lost his re-election bid in 1992. Trump, at 46.8% in 2020, and Jimmy Carter, at 47.7% in 1980, had higher approval readings than Biden does now but also lost. Barack Obama, in 2012, was the only sitting President in the last 70 years with an approval rating below 50.0% at this time to be re-elected.
Former President Trump is currently polling better than President Biden in the seven key battleground states likely to determine the election.
The latest Bloomberg News/Morning Consol poll of 4,969 registered voters has Biden ahead by 2% in Michigan and Trump ahead in Pennsylvania (+1%), Wisconsin (+4%), Georgia (+6%), Arizona (+7%), Nevada (+8%), and North Carolina (+10%). If the election were held today, Trump would probably win.
Despite the polling data, PredictIt pegs the Democratic nominee having a 55% chance of winning in November versus 48% for the GOP challenger. This takes us to a discussion regarding the power of incumbency.
Historically, it has been difficult to unseat a sitting president in the absence of a recession. Since World War II, Carter (1980) and Trump (2020) lost their reelection bids in cases where a recession took place in the election year.
But in the nine cases where there was no recession in any part of the election year, seven went on to be re-elected while Ford (1976) lost following Watergate and Bush (1992) lost in a case where the recession of 1990-1991 had ended but the National Bureau of Economic Research (NBER) didn’t declare it over until after the election.
By contrast, when the incumbent party ran someone other than the sitting President, they lost in 1952, 1960, 1968, 2000, 2008, and 2016. Bush (1988) won after serving as Reagan’s Vice President for eight years.
Taxes, Tariffs & Fed Independence
A second Trump presidency could mean lower taxes, higher tariffs, a more American-first agenda, and less regulation than another Biden term. It could also come with more pressure on the Fed.
Corporate tax reductions were made permanent in the 2017 Tax Cuts and Jobs Act (TCJA) but the marginal tax rates on individuals, the exemption for estate taxes, and the amount individuals can deduct for state and local taxes have sunset provisions starting at the end of 2025.
Making the sunset provisions permanent, as Trump would like, could cost $3.5 trillion according to the Congressional Budget Office (CBO) and the Joint Committee on Taxation. To the degree that this adds to the nation’s debt, it could provide upward pressure on interest rates and the US dollar against other currencies, assuming all else remains equal.
By contrast, President Biden laid out a vision for higher taxes on American businesses and wealthy Americans in his State of the Union Address.
It calls for raising the corporate income tax rate from 21% to 28% and taxing long-term capital gains and qualified dividends at a top rate of 44.6% through a series of proposals.
The main proposal would tax long-term capital gains and qualified dividends at the 37% top ordinary income tax rate for those earning $1 million, or more, rather than at the current 20% capital gains tax rate.
This would also apply to taxing unrealized capital gains at death for cases involving $5 million or more ($10 million for joint filers).
A second proposal would lift the top ordinary income tax rate from 37% to 39.6% while a third would lift the 3.8% net investment income tax to 5.0% for those with investment income over $400K.
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