This week we had both Trump and Clinton present their economic plans. Since then we have been inundated with media contrasting and comparing them. We saw it differently. What struck us was how similar the plans were in fact and tone. First of all their shared hostility to trade. Both turned thumbs down on the pending Trans Pacific Partnership trade agreement while vowing to upset agreements already in place such as NAFTA. In our series on “More” we pointed out governmental entities can gain “More” in only three ways. 1. Take from someone else 2.Trade for it 3. Innovate. As we have seen, the latter two often go hand in hand. Before you can talk about how it’s distributed “More” has to exist. If you aren’t creating “More” you are dividing the same old pie with those closest to power grabbing the biggest slices. Without incentive to even maintain, the entity will stagnate or implode. Cuba and Venezuela are just the latest examples. Trade is at the heart of capitalism. Obviously these two have no acquaintance with Adam Smith and David Ricardo. (What do they teach at the Wharton School of Business?).
Both would severely penalize businesses relocating operations beyond our borders. It takes by most estimates more than $100,0000 in invested capital to create the average private sector job. Who would want to invest in production in the US if like the Hotel California you can check in but never checkout? We’ve historically benefited from foreign investment but this would be an enormous beware sign. The same problem would affect US corporations that hold huge amounts profits overseas that otherwise might take advantage of Trump’s lower Corporate tax rate. The US has already dropped out of the top-tier of countries rated best to do business. This could position us to bring up the rear. How is this a plausible plan to expand employment? Likely it would have the opposite result.
Both would spend heavily on “infrastructure”such as roads, bridges and airports. Didn’t we just do that early in the Obama years to the tune of near a trillion bucks? What did we get for these”shovel ready projects” ? Only the favored few that received subsidies seem to have benefited. Crony capitalism (which is really anti-capitalism) at its best. Further, we are charged user fees for all this maintenance. Is someone not paying their fair share or was the money diverted to some other favored interests? Are we to pay twice? Three times? At best this is just maintaining not expanding.
Both would increase the minimum wage. As we have said in the past (Real Economists don’t do Minimum Wage posted 12/4/2014) you can spot someone who isn’t serious about economics by their support of a minimum wage. When is a raise not a raise? When your wage goes up but you’re fired. On a recent visit to McDonald’s we were greeted by the employee of the month.
Both would would offer a tax credit for childcare expenses. The majority of voters are women. Who can out pander the other? Enough said.
But the most egregious things they agree on is what they both omitted. Neither even mentions entitlements or the national debt. Our entitlements will relentlessly consume more and more of our national budget. This true even without figuring the costs of fixing Obama care. A return to normal interest rates on our enormous debt would also consume greater and greater portion of the budget. This means less and less for things such as defense and homeland security or for anything else we have come to expect from our national government . These problems are clearly foreseeable and therefore preventable if we take timely action. Failing that, we lay ourselves open to Murphy’s Law, “whatever can go wrong will go wrong sometime”. An unforeseen rise in entitlement costs at the same time we experience higher than normal interest rates and we have the perfect storm. Can’t happen. Remember the Great Recession was the result of the confluence of government policy favoring sub par borrowers and the Fed imposing abnormally low-interest rates resulting in yes “a perfect storm”. This just goes to show how irresponsible these two candidates actually are.
Neither would do much to rein in the increasingly crushing regulatory burden. Hillary in fact promises even more. Trump calls for a moratorium on regulations but his policies on foreign trade, company movements and immigration would result in a flood of new executive orders and their attendant mass of regulations. Just imagine, for instance, the morass of regulations associated with global supply chains under his proposed tariff walls. In any case neither is talking about how to rid ourselves of cost ineffective rules we already have on the books.
Even where there seems a real conflict in tax policy, Clinton wants to raise them on the wealthy and businesses and Trump wants to cut them, there is a sameness in tone. The history of our tax code is one of ever-expanding tax carve outs. Crony capitalism at its worst. Without real details for meaningful reform, each has just issued an invitation to lobby with all its pay for play implications.
The same goes for energy. Instead of letting the market decide which source is best for the user, both have their favorites for the government to monetarily favor. For Hillary it’s so-called renewables and for Donald it’s coal.
None of this should be surprising. After all, Trump is an admitted crony capitalist, giving to politicians expecting their future kindness and Clintons were among of his takers. Of greater importance is their shared mercantilist view of the world. “They don’t pay their fair share”. “They’re winning and we’re losing”. This means their supporters can only get “more” by taking it from you. Besides ignoring impending crises, neither grasps the idea of expanding trade and encouraging innovation to create wealth before you spend it. It’s a shame that the one presidential candidate that would espouse the alternate viewpoint probably won’t be on the debate stage. This a debate we really need to have.