Policy Prescriptions: Trump and Clinton on economic growth

WASHINGTON – Few Americans feel satisfied with the state of the U.S. economy, making it a central focus in the presidential election between Democrat Hillary Clinton and Republican Donald Trump.

The economy has improved over the past seven years from the depths of the Great Recession, but just not enough to give many voters a sense of security.

Unemployment is a healthy 5 per cent, yet the pulse of economic growth remains disturbingly faint. More workers hold college degrees, but the median income still lags its 1999 peak. Historically low mortgage rates have aided millions of homeowners, though the ownership rate has sunk to a half-century low. Prescription drug and daycare costs are mounting, even as overall inflation is mild.

The two presidential candidates have conflicting visions of how to jumpstart growth.

Clinton has mostly pointed to rising inequality as the problem. She has pledged to raise taxes on the wealthy to fund programs targeted at the middle class, such as tuition-free college, paid family leave and infrastructure projects. It’s a straight shot at redistribution after income gains have overwhelmingly favoured the top 1 per cent of earners.

“Our history has shown us that the strongest growth in our economy is inclusive, broad-based growth — when everyone can contribute to our prosperity and share in its rewards,” Clinton said in a speech this September.

Trump blames the sluggish growth on a mix of incompetence and corruption. Trade deals led to hijacked factory jobs that he would bring back by massive tariff hikes if necessary, he says. He aims to foster growth by slashing taxes for the wealthiest Americans and stripping away regulations. Trump often describes the economy as zero-sum with clear winners and losers, saying that foreigners have profited at the expense of U.S. workers.

“We will be a rich nation once again,” Trump said of the world’s largest economy at a recent speech in Colorado.

There are some similarities between these two candidates — both have championed the need for child care support. Experts outside the campaigns generally say that Trump would increase the national debt more than Clinton would. However, the conservative-leaning Tax Foundation has suggested that Clinton’s tax hikes could trim growth rates by 2.6 per cent over 10 years. But time frames matter as well: A study from the Penn Wharton Budget Model indicates that Trump’s tax plan is better in the short term, while Clinton’s would help more in the long term.

Here is a summary of their proposals:



CLINTON: She has a tangled record with trade. She once said the now-stalled Trans Pacific Partnership set the “gold standard,” but she disowned the agreement as trade deals have become unpopular with many voters. Clinton has said she would only support agreements that protect U.S. workers and environmental standards. But in paid speeches behind closed doors, she has told audiences that her “dream is a hemispheric common market, with open trade and open borders.”

TRUMP: For Trump, most of America’s woes stem from bad trade deals. Mexico, China and Japan are ripping off the United States, he says. Deals to open up markets such as the North American Free Trade Agreement only led firms to move their factory jobs to Mexico, he argues. Trump also says the result of these trade deals is a $500 billion trade gap that he would close by renegotiating the agreements, possibly hiking tariffs and then bringing those jobs back.

But none of the top economists surveyed by the University of Chicago this year thinks higher tariffs would bring back jobs. MIT professor David Autor — who has researched U.S. communities hurt by trade with China — said in answer to the survey: “Taxing consumers to subsidize domestic production is bad economics.”



TRUMP: He hopes to ignite growth with tax cuts for businesses and the wealthy, a plan that outside experts say would cause the budget deficit to rise sharply. His tax cuts — largely concentrated among top-earners and businesses — would cause the federal debt to climb $5.3 trillion through 2026, according to an analysis by the Committee for a Responsible Budget.

Trump would cut spending on Medicaid, eliminate Obamacare and reduce congressionally controlled domestic spending by 1 per cent annually. The Republican nominee also pledged to spend more on the military, veterans and infrastructure. Outside experts say Trump is unlikely to achieve the 3.5 per cent growth he promises in large part due to demographic factors such as an aging U.S. population that have kept growth tethered closer to 2 per cent.

CLINTON: She would raise taxes — primarily on the wealthy — by more than $1.5 trillion over 10 years. Those tax hikes would help to finance tuition-free college for many families, support child care programs, invest in infrastructure and provide paid family leave. The debt would increase $200 billion over 10 years under Clinton’s plan, according to the analysis by the Committee for a Responsible Budget. The extent of that debt increase is a fraction of what would likely occur under Trump.



TRUMP: He has embraced conspiracy theories about the U.S. central bank. The Fed has held short-term interest rates near historic lows since 2008 to help nurture economic growth. The rates have helped job gains without risking high inflation. If Fed Chair Janet Yellen faces any challenge, it’s now the delicate balancing act of undoing the many years of low rates without damaging the economy.

As a real estate mogul, Trump has said he loves low interest rates, but he also has called the independent Fed a political pawn of the White House. Yellen is holding down rates in order to make Obama look good, he says. Fed policy has inflated a “big, fat, ugly, bubble” in the stock market, he said in the first presidential debate. Yellen should be “ashamed,” Trump said.

CLINTON: She has backed a Democratic plan to take private sector bankers off the Fed’s regional boards, suggesting that the Fed should be more focused on the general public instead of financiers. Fed governor Lael Brainard has donated to the Clinton campaign, but Yellen has vigorously defended the Fed’s independence.



CLINTON: She has said her measure of success will be “how much incomes rise for hardworking families.” Her goal toward increasing incomes would include a $275 billion, five-year plan to rebuild infrastructure. The notion here is that repaired roads and bridges would create construction jobs, while also decreasing travel times for commuters. She also supports raising the federal minimum wage to $12 an hour from the current $7.25.

TRUMP: He has set a hard target of creating 25 million jobs over the next decade. This depends in large part on achieving the 3.5 per cent average growth that outside economists say is unlikely. The Trump campaign argues that lower tax rates, fewer regulations, newly negotiated trade deals and fewer restrictions on oil, coal and natural gas production will fuel these job gains. Trump’s plan assumes that greater drilling and mining of fossil fuels will add 500,000 jobs annually, although that claim appears not to factor in prices determined on the open market. Trump would also support greater infrastructure spending, saying he would double Clinton’s commitment.

EDITOR’S NOTE _ One in an AP series examining the policy prescriptions offered by the major candidates for president.