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Biden and Trump to Go Head-to-Head with Tax and Spend in Focus

Travel Tuesday, Thursday's live TV debate between Trump and Biden, focus on the upcoming elections in Mongolia, and what's happening today.

Travel Tuesday: Mongolia
Mongolian horsemen are alleged to have invented ice cream. They used to take cream in containers made from animal intestines for supplies during long journeys across the Gobi Desert in winter. When they galloped, the cream was vigorously shaken, while it simultaneously froze in the sub-zero temperatures.
GDP $6.2 billion
Biggest Export Copper, molybdenum, gold, coal
Biggest Trading Partners China, Russia, Switzerland
Political System Parliamentary Republic
National Animal Takhi (Przewalski’s horse)
Next Election 25 June

Biden and Trump to Go Head-to-Head with Tax and Spend in Focus

On Thursday evening, the US electorate – amongst others – will be tuning into CNN where President Joe Biden will go head-to-head with former President Donald Trump for their first live TV debate of the 2024 election.

The debate, held in Atlanta, Georgia, will mark the first time a debate has taken place between a sitting president and a former president.

Given the scenes in the 2020 election debates, the presidential candidates’ microphones will be muted while the other is speaking. It is also of interest to note that no pre-prepared notes will be allowed on stage, meaning that both will have appeal to their memory.

As the FT’s Oren Cass noted in an article yesterday, with the annual US budget deficit nearly at $2tn – and interest payments on debt now exceeding that of spending on defence – the debates around tax and spend must come against the backdrop of Washington’s existing fiscal position.

As we looked at earlier this month, one issue that could well be debated on Thursday is the Tax Cuts and Jobs Act of 2017. This was essentially the largest change to the tax code in decades, reducing taxes for tens of millions of households and business across the US economy, but since many of the cuts are set to expire next year, it is back as a key topic of debate.

For example, according to the Congressional Budget Office, extending all cuts for another decade would cost some $3.5 trillion, eating ever further into the US’s gargantuan public debt. (This means that extending the TCJA would amount to the public deficit being around 1 to 1.5% of GDP higher per year).

Cass’ article goes on to cite William Gale and Andrew Samwick’s argument that “the historical evidence and simulation analyses suggest that tax cuts that are financed by debt for an extended period of time will have little positive impact on long-term growth and could reduce growth.” As such, Cass considers that any major tax cuts announced in the US could impede – rather that catalyse growth – given their debt position.

Such an assessment will no doubt be debated by Trump and Biden, with the former more likely to seek to extend the TCJA further out into the future (and no doubt funding it through further borrowing).

For more on the article follow the link here.

Mongolian Elections

Talk of the French, UK and US elections has continued to dominate headlines this month. One election that has perhaps fallen under the radar however is the Mongolian elections.

On 28 June, the Mongolian electorate will head to the polls to decide the makeup of all 126 seats in the State Great Khural.

This is the first time that the State Great Khural will be chosen under a new voting system which aims to increase polarity and accountability by using a mixture of proportional representation and block plurality methods.

Not long ago, protests erupted around the country following a corruption scandal which involved the embezzlement of $13bn dollars’ worth of coal exports, with links to those in office.

Corruption therefore continues to be a salient issue over the course of this election, as does the economy, the environment and the country’s foreign policies.

The incumbent government – The Mongolian People’s Party (MPP) – who have a considerable parliamentary majority have ambitious plans for growth, with its landmark ‘Vision 2050’ aiming to increase GDP from $13.1bn today to a monumental $209bn by 2050.

In doing so, they are seeking to increase GDP per capita from $4,000 to $38,000 through six percent annual growth. (Real GDP in Mongolia grew 7% in 2023).

Mongolia continues to position itself as a major exporter of raw materials – including coal, copper and gold – to China and Russia in addition to other economies across Asia and further afield. (China itself accounts for 8 in every 10 dollars of goods and services exported from Mongolia).

Mongolia will also seek to massively increase tourism over the coming years as they seek to diversify their economy away from natural resources.

Attention now turns to the election on Friday.

Today’s Data

While today is a little light on the primary data front, attention will turn to Canadian inflation figures released at 1330 this afternoon as markets continue to speculate on the BoC future monetary pathway following their cut earlier this month. This comes ahead of US consumer confidence figures at 1500.

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