The "Opportunity Economy" Policy of the Democratic Presidential Candidates and Its Potential Impact on the crypto market

This week, the market has entered a calm period ahead of the Jackson Hole meeting. Investors are awaiting the Federal Reserve Chairman's official interpretation of the latest employment and inflation data, as well as clear guidance on future monetary policy. This will undoubtedly become a key reference for the interest rate decision in September.

It is worth noting that a Democratic presidential candidate recently unveiled their first clear economic policy framework - "Opportunity Economy." This framework is a left-leaning economic proposal aimed at reducing the living costs of the American people through government policies in four areas: housing, healthcare, food and daily necessities, and childcare. If implemented, this proposal could drive the crypto market to replicate the upward trend of 2021, but it may also trigger a resurgence of inflation in the United States.

$1.7 trillion subsidy program

Recently, as this candidate officially received the nomination, their momentum has significantly increased under active promotion from all sides. Polling data once surpassed that of another major competitor. Although polling results may be influenced by various factors, this also reflects to some extent the strength of the candidate's campaign team, which should not be underestimated.

For a long time, this candidate's stance on economic policy has not been clear enough, mainly due to their work history. However, the "Reducing Costs for American Families Agenda" released on August 16 surprised many and sparked significant controversy. This document is referred to as the "Opportunity Economy" framework, as the campaign team believes that by alleviating costs for American families, more members of the middle class will have access to job and entrepreneurial opportunities, thereby stimulating overall economic vitality and rekindling the American Dream.

The policy mainly involves four aspects:

1. Housing:

   • Call for the construction of 3 million new homes
   • Provide tax incentives for building entry-level housing and affordable rental homes.
   • Established a $40 billion federal innovation fund
   • Reduce government review and approval processes
   • Crack down on improper behavior by enterprises and major landlords
   • Provide a $25,000 down payment subsidy for first-time homebuyers

2. Medical:

   • Set the insulin cost cap at $35
   • Set the out-of-pocket maximum for prescription drugs at $2000
   • Accelerate the negotiation speed of medical insurance for prescription drugs
   • Enhance competition and increase transparency in the healthcare industry

3. Food and daily necessities:

   • Promoting the federal's first ban on price fraud for food and groceries.
   • Establish rules to prevent large companies from unfairly exploiting consumers
   • Grant regulatory authorities new powers to investigate and penalize violating companies

4. Parenting:

   • Tax cuts for middle-class families with children
   • Provide tax credits for families with newborns
   • Tax reduction for dual-income households
   • Tax deduction for purchasing health insurance

These proposals promise to be implemented within the first 100 days of taking office. However, the plan has also sparked considerable controversy, mainly focusing on housing and food essentials policies, as well as the overall budget size. Opponents argue that the radical housing subsidies and construction policies will significantly increase government financial pressure and exacerbate the debt crisis. The food essentials policy could violate market laws, triggering a new round of inflation and leading to the bankruptcy of related businesses.

According to estimates from non-profit organizations, the program will increase the government deficit by $1.7 trillion to $2 trillion over the next 10 years. This could exacerbate the debt crisis in the United States, drive up inflation, and further intensify social conflicts. Following the announcement of the bill, both the dollar index and gold prices experienced significant fluctuations.

Potential Impact on the Crypto Market

Analyzing the impact of this bill on the crypto market, it can be found that it may bring short-term benefits but long-term disadvantages. Although the proportion of the middle class in the United States has decreased, it still exceeds 50%, making it the main beneficiary group of this bill. If the proposal is implemented, the disposable income of middle-class families in the United States may significantly increase in the short term, providing upward momentum for risk assets, especially technology assets with high EPS.

This scene has played out before in 2021. At that time, the Biden administration's $1.9 trillion COVID-19 relief bill caused a surge in disposable income for American families in the short term, leading to a wave of increases in the crypto market, represented by Bitcoin. However, as the wealth effect accumulated and inflationary pressures grew, it ultimately led the Federal Reserve to undergo a monetary tightening cycle lasting more than two years, causing a significant pullback in risk assets.

Therefore, if economic policies of a similar scale are implemented, it may be beneficial for crypto assets in the short term. However, in the medium to long term, we need to be cautious of the monetary policy risks brought about by the return of inflation. Of course, all of this is predicated on the candidate being able to win the election and effectively implement these policies. Continuous attention to relevant developments will be necessary in the future.