Odds are, you’re either excited about the prospects of a Joe Biden presidency or devastated. These days, it doesn’t seem as if there’s any in-between.
But whatever your feelings about the new administration, the following changes are coming that could affect your bank account and finances:
- Stimulus checks.
- Student loans.
- Utilities and energy.
- Real estate and mortgages.
- Your career.
In the days before the Georgia Senate runoff elections, there was a lot of talk from both sides of the aisle that Americans should receive $2,000 stimulus checks. Now-former President Donald Trump was a proponent of the idea, and on Jan. 10, Biden tweeted that $600 “is simply not enough when you have to choose between paying rent or putting food on the table. We need $2,000 stimulus checks.”
So will there be more stimulus checks?
Jonathan Brogaard, a professor of finance at the David Eccles School of Business at the University of Utah, says yes.
“I expect there will be a third stimulus check,” he says.
Brogaard points out that after Georgia’s two senate seats were won by Democrats, resulting in the Democrats having effective control of the legislative branch, the stock market reacted by increasing by around 1.5%.
“My view is that the market response is driven by the increased likelihood of a third stimulus check, and that the market thinks that additional stimulus will increase firms’ valuations,” he says.
That said, even if the stock market and Americans are hoping for more stimulus checks, the stimulus checks will have to be voted on by Congress.
There are also unanswered questions of whether Americans will receive a full $2,000 or if the most recent $600 stimulus check will be considered part of the $2,000. But it seems like a safe bet that in late January or February, Americans may see an influx of cash in their bank account or in the form of a paper check or an economic impact payment card in their mailbox.
“Anyone with an income of $400,000 or more will see a tax increase, while those with lower incomes – below $160,000 – will probably see a tax reduction because of a whole host of proposed tax credits,” Nersisyan says.
That sounds great if you earn less than $400,000 and especially below $160,000, though Curtis Nicholls, associate professor of accounting at Bucknell University in Lewisburg, Pennsylvania, says it’s possible that people will pay more for goods and services, even if their income taxes don’t rise.
Corporate taxes are expected to go up, Nicholls says. “The change in corporate taxes could have a more direct impact on the average American as companies may pass on the increased cost by way of price increases,” he says.
Still, as a general rule, “for the average U.S. resident, taxes should change very little,” Nicholls says.
“President-elect Biden has indicated his favor for forgiving a portion of outstanding borrowers. Immediately after the election several Democratic officials began calling for an executive order forgiving $50,000 of student loan debt. President-elect Biden’s proposal was slightly more modest at $10,000,” Nicholls says. “Either way, I would expect some level of forgiveness. There has also been some movement toward addressing the long-standing preferential treatment for student loans with regard to bankruptcy forgiveness.”
Parents and students might also have a better sense of how much college costs going forward.
“Along with the potential for student loan forgiveness, the new administration may begin building on Obama-era reform that required more transparency in college costs,” Nicholls says.
Will Delavan, associate professor of economics at Lebanon Valley College, in Annville, Pennsylvania, agrees that more transparency is likely in the coming years.
“It looks like Biden is going to try to help make student loans and grants more affordable, transparent and available,” he says.
Utilities and Energy
You don’t typically look at your electric bill and wonder what will change when a new president is elected, but Nicholls thinks some people will see their energy costs drop. Or perhaps consumers may get a break on the type of car they buy.
“I would anticipate an expansion of federal tax credits for renewable energy. This could benefit consumers buying a new car or seeking to make their home more energy-efficient,” Nicholls says.
On the other hand, under the Biden administration, some people may see their energy costs go up.
“Energy policy may shift, curbing controversial energy production such as fracking and drilling in certain areas. This shift could drive up short-term utility prices until more sources of renewable energy are implemented,” Nicholls says.
Real Estate and Mortgages
The new administration won’t likely affect your mortgage or rent as much as the pandemic will, predicts Ron Throupe, associate professor at the Franklin L. Burns School of Real Estate and Construction Management at the University of Denver’s Daniels College of Business.
“The residential real estate markets have seen price increases in the recent past, and suburban markets have been particularly strong with migration from cities with current COVID-19 restrictions and ability to work remotely,” he says. “Residential prices will be relatively flat as COVID-19 subsides, demand softens as economic recovery stretches out and interest rates begin to rise as a reaction to further economic stimulus.”
If you’re looking for a new place to rent, Throupe thinks rent will go down, “particularly in cities as leases roll over and remote work becomes an ingrained work option coming out of COVID.”
Moody’s Analytics, a financial services company that specializes in financial intelligence, released a Sept. 23 report that predicted Biden’s “Build Back Better” economic plan, if enacted under a Democratic administration, would create 18.6 million jobs. It also suggested that that the incomes of middle-class Americans would go up $5,000 a year.
While that may or may not happen, Delavan says you shouldn’t assume you’ll be getting a new job or raise any time too soon.
“Job creation is not like instant coffee. If someone actually knew how to easily create jobs, then we would just pay that person and voila: instant jobs. But jobs do not instantly appear by fiat,” he says.
And, of course, we must consider the pandemic, which strangled job creation in 2020 and will likely continue to in 2021. Still, hopefully when COVID-19 eases up, whether you’re a fan of the Biden administration’s policies or not, everyone’s finances will improve.