As of September 2016, Gallup shows that Americans rated the economy as the most pressing issue facing the country. The economic malaise felt across the nation has weighed heavily on this year’s Presidential election. Both Hillary Clinton and Donald Trump have made the economy central planks of their campaigns. This was evident at the first Presidential debate on September 26th, at Hofstra University in New York. The opening segment of the debate focused on “American Prosperity”, giving candidates opportunities to discuss their economic agendas.
Businessman and Republican candidate Donald J. Trump focused his economic message on retaining American manufacturing jobs. He focused specifically on jobs lost to Mexico and China. Trump has blamed these losses on poorly negotiated trade deals and purported currency manipulation by the Chinese government—a claim oft levied but scarcely substantiated by American politicians. To improve the US economy, Trump announced his wish to have preventative and punitive policies to keep manufacturers in the US. He hopes to prevent losses by slashing business and corporate taxes from 35% to 15% across the board, and providing incentives to build and expand businesses in the United States. His punitive policy for companies seeking to leave the US, however, is less clear, though seems to hinge on repatriation provisions. In his own words, “if you think you’re going to make your air conditioners or your cars or your cookies or whatever you make and bring them into our country without a tax, you’re wrong.” Though this seems to imply some sort of tariff or tax, Trump’s website did not provide further clarification.
Trump focused his fire on the Federal Reserve, arguing that the Federal Reserve Bank has become “more political than Secretary Clinton.” In general, attacks on the US central bank have been common from the extremes of American politics. Both Senator Rand Paul (R-KY), a libertarian and Tea Party favorite, and Senator Bernie Sanders (I-VT), figurehead of the American Left during his 2016 Presidential bid, have criticized the Federal Reserve and voted to audit the institution. Such critical rhetoric from major political parties has been rare—save for perhaps Andrew Jackson. Trump’s accusation stems from his view that consistently low interest rates prop up a fragile economy, which could react poorly to a rate hike. Trump’s criticism of low interest rates clashes with former statements he has made on monetary policy. In response to a question on whether he would reappoint Yellen, the businessman responded, “She’s a low-interest-rate person, she’s always been a low-interest-rate person…and I must be honest, I am a low-interest-rate person.” Donald Trump’s conflicting stance towards monetary policy gives reason for markets to remain skeptical of a Trump administration.
Former Secretary of State Hillary Clinton, the Democratic candidate, made her own progressive economic case. She announced that her administration would build an economy that “works for everyone, not just those at the top” by implementing policies to make the economy fairer. This involves increasing the federal minimum wage from the current $7.25 per hour to $12, mandating equal pay for women, providing affordable childcare, and the implementation of debt-free college. Clinton’s main point of contention with Trump in economic terms concerned tax policy. Trump’s plan aims to cut taxes on all Americans, reducing federal revenues by $9.5 trillion in a decade and increasing the national debt to 80% of GDP by 2036. Clinton dismissed this proposal as “Trumped-up trickle-down economics.”Her tax proposal asks the wealthy and corporations to “pay their fair share” and “rewards work rather than financial transactions.” The Tax Policy Center calculates that Clinton’s tax plan alone would bring in an additional $500 billion in revenue, mainly through caps on itemized deductions and imposing a 4% tax on those with incomes above $5 million. With this new revenue, Clinton aims to finance new government spending in infrastructure, education, healthcare, and middle-class tax cuts. The Tax Foundation also estimates a long term 1% decrease in GDP because of Clinton’s higher tax rates on capital. Clinton also takes a much rosier view of the economy than Trump, giving President Obama credit for the post-recession economic gains, while still asserting that the economy needs fundamental changes.
To hear the tone of the candidates at the debate and on the trail, one might believe that they agree on very little—if anything. Trump’s best line of attack against Clinton, however, is something they both agree on: trade. At the debate, both candidates emphasized the need for trade deals with minimal American job loss and maximum American GDP gains. Trump’s attack lines against Clinton on the Trans-Pacific Partnership is familiar to those who watched the economic rhetoric of the democratic primary, when Sanders attacked her for supporting the Trans Pacific Partnership deal (TPP) as Secretary of State. At best, Clinton’s insistence that she is now adamantly opposed to the deal does little to help her ease voters’ concerns about trustworthiness. At worst, it reinforces public perceptions of her as a candidate who flips on important issues.
The potential economic ramifications of the 2016 election are vast. With the rhetoric concerning free trade, US policy is subject to shift with either candidate’s election in November. The traditional roles of the two major parties are in the air as well. The GOP, a party that typically extolls free markets, has nominated their most fiercely anti-free trade candidate in recent memory. Democrats are not certain where Hillary Clinton falls on free trade, though she has been to the right on the issue in the past. The likelihood that either of these candidates could pass their ideal economic agendas through Congress is minimal. Hillary Clinton cannot get a minimum wage hike through Paul Ryan’s House or what may continue to be Mitch McConnell’s Senate. Likewise, Trump cannot get a tariff through what may be Chuck Schumer’s Senate, or Paul Ryan’s House, for that matter.
As the race continues, it is hard to see whether the specifics of economic policy will be the decisive factor in November. In the days after the debate, FiveThirtyEight’s election forecast began to shift in Clinton’s favor, giving her a 78% chance of winning the election, numbers she has not seen since the end of August. But the political scene here in the United States and abroad continues to be volatile. Contrary to general consensus in the economic community about the potential for a recession if the UK voted to leave the European Union in the June 2016 Brexit referendum, voters chose leave by a nearly seven point margin. As critical as the economic issues in this campaign are, 2016 has shown to be a year of politics, not economics.