The 2016 Presidential candidates are Hillary Clinton (Democrat) and Donald Trump (Republican). Their party affiliation helps you understand their economic plans. By understanding these political plans and affliations will make you an informed voter.
Democrats promote the Keynesian theory. It says government spending and tax cuts boost economic growth by increasing demand. Most Democrats target these policies toward middle-income families. They offset deficit spending with higher taxes on investments, large businesses, and high-income families. They address income inequality by providing more benefits for low-income families. That’s because they will spend the extra money on food, medicine, and shelter. That drives demand more than saving and investing does.
Deficit spending is not an accident. The President and Congress intentionally create it in each fiscal year’s budget. That’s because government spending drives economic growth. For example, it buys defense equipment, medical supplies, and buildings. The businesses it contracts with hire people, and the government hires people directly.
Republicans promote supply-side economics. That theory says reducing business, trade, and investment costs are the best way to increase growth. Businesses use the extra money to hire more workers. Unfortunately, that hasn’t been the case in this recovery. Companies have plenty of cash, but aren’t spending it on capital improvements or new jobs. They are investing it in the stock market, U.S. Treasuries, and overseas investments.
An income tax cut increases the dollars per hour worked, increasing workers’ incentive to remain employed, and thereby increasing labor. This increase in supply boosts economic growth. That’s why supply-side is also known as trickle-down economics.
Businesses can raise prices, and workers can then bargain for higher wages, which will translate back into higher tax revenues. Some supply-side proponents even argue that, over time, any lost tax revenue will be recouped through greater tax receipts from a booming economy.
Mr. Trump favors cutting taxes for everyone and reducing the number of tax brackets from seven to three. He would reduce the top rate of tax to 33% from 39.6%.
Mrs. Clinton would keep taxes the same for most Americans but add an additional bracket for the highest earners. The income from that would be used to pay for programs like free university education for students from low- and middle-income families.
Her campaign is calling the higher taxes on the wealthy – 4% on people who earn more than $5m – the “fair share surcharge”.
|Clinton tax brackets||Trump tax brackets|
|Earnings under $9,275 – pay 0%||Earnings under $29,000 – pay 0%|
|$9,275 to $37,650 – pay 15%||$29,000 to $54,000 – pay 12%|
|$37,650 to $91,150 – pay 25%||$54,000 to $154,000 – pay 25%|
|$91,150 to $190,150 – pay 28%||Over $154,000 – pay 33%|
|$190,150 to $413,350 – pay 33%|
|$413,350 to $415,050 – pay 35%|
|$415,050 to $5,000,000 – pay 39.6%|
|Over $5,000,000 – pay 43.6% (new bracket)|
Both candidates have proposed closing tax loopholes that typically favor the rich.
Mr. Trump proposes a child care deduction that would cover the average cost of child care, while Mrs. Clinton favors limiting the number of deductions taxpayers can claim at 28%.
Tax deductions allow people to subtract some of the income they are taxed on – effectively lowering which bracket they fall into. They typically favor the rich who can take more, while the 43% of Americans who currently pay no income would be unaffected by the change.
Mr. Trump also proposed eliminating the estate tax or “death tax” completely. The tax only applies when a family member passes on more than $5.45m worth of assets to an individual or $10.9m to a married couple.
The Republican candidate said he would also reduce the US corporate tax rate to 15% from the current rate of 35%, one of the highest in the world.
Mr. Trump’s campaign said the plan would reduce the amount of income the government collected by $4.4tn over a decade. This is far below the $9.5tn calculated by the nonpartisan Tax Policy Center in August. The Center said Mrs. Clinton’s plan would add $1.1tn in revenue over the next 10 years.
Neither candidate has proposed significant reductions in spending on public pension and healthcare programs like social security, Medicaid and Medicare. The funding needed for those is expected to balloon over the next decade and its unclear where the money to pay for them will come from without tax increases.
An analysis performed by Tax Foundation last month found that while Mr Trump’s plan would lower taxes for all Americans it would lower them most for the highest earners.
New trade deals
Mr. Trump has done his best to capitalize on the discontent around trade deals.
His economic proposal suggests renegotiating trade deals using “negotiators whose goal will be to win for America”. He has not spelt out what that “win” looks like, but he has promised to step away from deals like the North American Free Trade Agreement (NAFTA) if a good deal cannot be reached.
Mr. Trump has also promised to get tough with countries that violate trade agreements, applying new tariffs and pursuing cases against them in the World Trade Organization. He has specifically said that he will label China a “currency manipulator”.
Mr. Trump has called for a 35% tariff on Mexican goods and a 45% tariff on Chinese goods.
That would mean a $100 television from Mexico would cost $135.
This could encourage US consumers to buy more products made in America, but it would also likely encourage Mexico to place an import tax on US goods, making it hard for US companies to sell their goods abroad. Mexico purchased $267.2bn in US goods in 2015, making it the second largest export partner for the US.
Mrs. Clinton has said these tariffs will lead to a trade war making it harder for the US to compete on a global stage.
Clinton has gone back and forth on trade. She previously supported the Trans-Pacific Partnership (TPP) but has said in her campaign that she doesn’t think it’s the best deal for America.
Her plan focuses more on increasing production in the US by offering tax incentives to companies that build there rather than barring imports out. While she has criticized some trade deals, she hasn’t ruled out signing new ones if elected.
Trump on trade
- Renegotiate trade deals to favor the US
- Walk away from trade agreements if a good deal can’t be reached
- Add tariffs on some of the America’s largest trading partners including Mexico and China
Clinton on trade
- Changed her mind on TPP, which she helped negotiate
- In 2007 criticized trade deal with South Korea, then supported it as Secretary of State
- Supported NAFTA but has since been critical of it
Both candidates have promised to put Americans back to work, though unemployment has hovered around a low 4.9% since the beginning of the year.
Mr. Trump’s employment plan focuses on encouraging more businesses to open in the US. He has suggested that investing in infrastructure, cutting the trade deficit, lowering taxes and removing regulations will make it easier for companies to hire.
Mr. Trump has focused mostly on increasing manufacturing jobs, which have declined by around 5 million since 2000. Much of that decline has been caused by improvements in technology, however, not outsourcing.
He has promised to create 25 million jobs over 10 years and achieve annual economic growth of 3.5%. US GDP growth reached 2.4% in 2015.
Mrs. Clinton’s policy for jobs growth is a little more specific. She has called for increasing jobs training – in part paid for by tax revenue from wealthier Americans. She has pushed for infrastructure spending and investment in new energy to lift the number of jobs in those sectors.
Mrs. Clinton advocated making “the economy fairer.” In promoting that stupid notion – stupid, because mutually consensual exchange is by nature “fair” from any objective point of view – she pushed raising the national minimum wage (potentially throwing thousands out of work) and “equal pay for women’s work” (read: unequal pay for the same work for men). But her truly insane line came next: “I also want to see more companies do profit-sharing. If you help create the profits, you should be able to share in them, not just the executives at the top.” Now, many companies already have so-called “profit sharing” – employees who own stock benefits. On a broad level, all companies have “profit sharing” – you have continued employment because your company earns a profit. You don’t have a share of every dollar of profit earned because you don’t get dinged for every loss. But Hillary seems to be advocating for a full-scale governmental intervention into every business in America – letting the feds decide how much employees should make in every industry. This is, as Dennis Prager pointed out today, economic fascism.
What They Kind Of Agree On
Despite their many areas of disagreement, there a few things both candidates are pushing for.
- Ending corporate inversion – or transactions where US companies move their corporate headquarters abroad to avoid US taxes
- Eliminating carried interest tax – a tax that mostly benefits hedge fund investors
- Opposing the Trans-Pacific Partnership (TPP)
Mr. Trump has not addressed how he will pay for these cuts, other than saying the changes will boost the economy and that will increase the tax base.
Mrs. Clinton has said most of her spending increasing will be covered by tax increases, but it is unclear if those numbers entirely match up.