Opportunity Economy: The Democratic Party’s new economic deal may affect the direction of the crypto market

This week, the market entered a wait-and-see period ahead of the Jackson Hole meeting, and all parties are waiting for the Fed chairman to interpret the latest employment and inflation data and give clear guidance on future monetary policy, which will undoubtedly be an important reference for interest rate decisions in September. However, on Friday, an interesting piece of information appeared, but did not attract much attention in the crypto world - a Democratic presidential candidate officially unveiled the (Opportunity Economy) of his first economic policy framework, the “economy of opportunity”. This is a far-left economic program that aims to reduce the cost of living in the United States through government policies in four aspects: housing, medical care, daily necessities, and childcare. If implemented, it could push the crypto market back to the upward trend of 2021, but it could also trigger a resurgence of inflation in the United States.

$1.7 trillion subsidy program

With the official nomination of the candidate, its momentum has increased significantly with the active publicity of all parties. At one point, the poll data surpassed Trump’s, and it was quite expected. However, those familiar with the U.S. electoral system know that poll results are often subjective, and the expected results can be derived through survey methods, questionnaire design, and respondent selection. Therefore, it is necessary to be cautious about these data. However, this also reflects, to a certain extent, the strength of the campaign team, which has launched an all-out propaganda offensive after integrating internal forces, should not be underestimated.

The candidate has long been questioned for his lack of a clear stance on economic policy, which is linked to his political experience. However, given its left-wing populist tendencies on issues such as immigration and policing, the market has somewhat predicted that its economic policies may be left-leaning. On August 16, his campaign officially released its first economic policy document, the Agenda for Reducing Household Costs in the United States, which surprised many and caused a lot of controversy.

The proposal is called the “opportunity economy” because the campaign believes that by reducing household spending in the United States, more middle-class jobs and entrepreneurship opportunities will be available, which will stimulate the overall economic vitality and restore the American dream. The controversy mainly focuses on its ultra-left economic policy orientation, which tries to reduce the cost of living in four aspects: housing, medical care, food and daily necessities, and childcare through government intervention.

In terms of housing, the proposal puts forward three main measures:

1. Call for the construction of 3 million new housing units to address the housing shortage within four years. Specific measures include tax incentives for the construction of entry-level homes and affordable housing; a $40 billion federal innovation fund to incentivize innovative housing construction programs; Streamline the government approval process and reduce associated costs.
2. Cracking down on businesses and large landlords to lower rents, including stopping large-scale speculation by Wall Street investors and removing tax incentives for single-family rental housing; Stop large corporations from using pricing tools to manipulate rents.
3. Provide a $25,000 down payment subsidy for first-time home buyers, expand the Biden administration’s 400,000 slots to 4 million, and relax the review criteria.

The medical aspects mainly include:

1. Set the insulin cost cap at $35, and the out-of-pocket cost cap for prescription drugs at $2000.
2. Accelerate the negotiation of prescription drugs by Medicare.
3. Enhance competition and demand greater transparency in the healthcare industry to combat misconduct by pharmaceutical companies and pharmaceutical intermediaries.

In terms of food and daily necessities:

1. Introduced the first federal ban on food and grocery price gouging.
2. Establish clear rules that prohibit large corporations from unfairly exploiting consumers and making excessive profits from food and groceries.
3. Grant the Federal Trade Commission and state attorneys general new powers to investigate and severely punish violative companies.

Parenting aspects include:

1. Tax breaks for middle-class families with children up to $3,600 per child.
2. $6,000 tax credit for the first year for families with newborns.
3. $1,500 tax break for dual-income families.
4. Tax deductions for health insurance purchases.

The campaign pledged to begin implementing the proposals within 100 days of taking office. The most controversial centers on housing and food policies, as well as the size of the overall budget. Opponents argue that aggressive housing subsidies and construction policies will significantly increase the pressure on the government’s finances and exacerbate the debt crisis. The food and daily necessities policy goes against the laws of the market and blames inflation on improper corporate profits, showing a lack of understanding of the market. In fact, retail is a fully competitive market, with most retailers maintaining single-digit profit margins, and government intervention could lead to an imbalance between supply and demand, triggering a new round of inflation and causing a large number of corporate bankruptcies.

In terms of the overall budget, the non-profit organization Committee for the Responsible Federal Budget estimates that the programme will increase the government deficit by $1.7-2 trillion over the next 10 years. This could raise three problems: exacerbate the U.S. debt crisis, drain the nation’s credit and trigger a potential dollar crisis; pushing up domestic inflation; Since the budget will be borne mainly by the wealthy, it runs counter to Trump’s tax cuts and could further exacerbate social tensions. After the bill was announced, the U.S. dollar index and gold both fluctuated greatly.

! Democratic Harris’s first clear economic policy: How the “economy of opportunity” will affect the crypto world

Impact on the crypto market: short-term bullish long-term bearish

To analyze the impact of the bill on the crypto market, it is necessary to consider the class structure of American society. The United States has always prided itself on its spindle-shaped social structure, which, despite a decline in the percentage of the middle class, still exceeds 50 percent. The bill primarily benefits this group. Although there is a diminishing effect of government policies on economic intervention, they can usually still have a significant impact in the short term. If the plan is implemented, the cost of living for middle-class families in the United States will fall sharply in the short term, and disposable income will increase. This has created the conditions for risk assets, especially high-yield technology assets, to rise.

This scenario has already played out in 2021. The $1.9 trillion COVID bailout bill introduced by the Biden administration at that time caused a short-term surge in disposable income for most American households, triggering a bull market in the crypto market represented by Bitcoin. But as the wealth effect accumulates, inflationary pressures are mounting. To combat stubborn inflation, the Fed has had to carry out more than two years of monetary tightening, leading to a sharp pullback in risk assets.

Therefore, if an economic policy of a similar scale is implemented, it may be good for crypto assets in the short term, but in the medium and long term, we need to be wary of the monetary policy risks brought about by the return of inflation. Of course, all this is premised on the candidate being able to win the election and effectively implement the policy. We will continue to pay attention to relevant developments in the future.

! Democratic Harris’s first definitive economic policy: How the “Opportunity Economy” Will Impact the Crypto World