Trump, Clinton, and the fate of the economy

As Hillary Clinton and Donald Trump duke it out on the campaign trail, the economy hangs in the balance.  Contrary to Trump’s doom and gloom non-reset speech yesterday, the economy continues to gain steam and add jobs.  But the fate of the recovery may rest on the outcome of the November election.

A team of respected economists at Moody’s Analytics attempted to forecast the economic implications of each presidential candidate’s policy agenda, and the difference couldn’t be more stark.  Put simply, a Clinton presidency would strengthen our economy’s steady growth, while a Trump presidency would be an all-out economic calamity.

Clinton’s policy platform is carefully crafted to build up the economy.  The Moody’s team looked at the suite of Clinton’s major policy proposals, including increased spending on education and infrastructure, higher taxes on the rich, guaranteed paid family leave, and a higher minimum wage.

Moody’s found that if Clinton’s agenda were fully enacted, it would boost economic growth and create 3.2 million new jobs by the end of her first term.  The biggest benefits would flow to low- and middle-income families, and the average household’s after-tax income would rise by some $2,000.

Unemployment would fall as low as 3.7 percent—a level of full employment not seen since 2000.  With a new paid leave program and subsidies for child care, more parents would join the labor force.

These staggering employment figures are all the more remarkable because Moody’s expects Clinton’s new $12 minimum wage to eliminate 650,000 jobs.  This is somewhat controversial, and economists are largely split on how the minimum wage affects employment.  Some think a higher minimum wage makes workers more expensive and costs jobs; others think it gives workers more spending money and grows the economy to generate new jobs.  Regardless, Moody’s still sees a higher minimum wage as a net win for the economy, because the pay raise for low-wage workers substantially outweighs the lost income for those who might lose their jobs.

Importantly, Clinton’s tax plans wouldn’t drag down the economy either, even though she intends to impose new taxes on the rich.  This is because the economy can stomach these kinds of taxes, and so can the wealthy.  “[A]ffluent taxpayers,” the analysts explain, “are much less likely to change their spending behavior due to a tax increase than lower- and middle-income consumers.”  Because individual spending isn’t harmed, taxing the rich doesn’t inhibit economic activity.

All told, Clinton’s economy would build off of the steady growth and 70 months (and counting) of job creation of the Obama economy—the longest streak in American history.

And what of President Trump?  Batten down the hatches and stock up on canned goods.  According to Moody’s, the only thing “great” that Trump will make for America is another Great Recession.

Moody’s found that Trump’s major campaign promises—mass deportations and curtailed immigration; tearing up and rewriting trade deals; and slashing taxes on the rich—would cause economic catastrophe.  “By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%,” Moody’s calculated.  The economy would plunge into recession for two years starting in 2018 and would shrink by 2.4 percent.

It gets worse.  Trump’s agenda would produce no income gains for the typical American family.  Stock prices would plummet, and the federal budget deficit would balloon by an additional $1 trillion.  As Trump rounds up and exiles undocumented immigrants, the economy would struggle from the loss of workers.  Not to mention, Trump’s overt hostility (in both rhetoric and policy) to Mexico and China would spark a retaliatory trade war, costing the United States $85 billion in exports.

A Trump administration would be an abject economic disaster, quickly collapsing the fragile momentum the economy has painstakingly gained since digging out of the last recession.  As Moody’s puts it, under Trump, “the U.S. economy will be more isolated and diminished.”

Now it’s true that this analysis fancifully assumes that either candidate will be able to swiftly enact their entire agenda upon taking office.  This is exceedingly unlikely, as Clinton may find herself stymied by a Republican Congress, and Trump could get bogged down in the courts.

Be that as it may, the White House under President Hillary Clinton would be an active aid to the economy.  Under President Trump, it would be a constant drag and an unprecedented risk.

The economy is perpetually the foremost issue on Americans’ minds.  As they go to the polls in November, voters face an unparalleled choice—a choice between growth or recession, between 3 million new jobs or 3 million lost.  The candidates’ agendas present a vast chasm in economic fortunes for the next four years.  Voters must decide which side they want to be on.

 

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