Back in 1992 when Bill Clinton was campaigning for the presidency against incumbent President George H. W. Bush, his repeated refrain was “It’s the economy, stupid!” Despite all the concern about other issues such as immigration reform, terrorism, and gay rights, economy is still the most important issue on the minds of most Americans.
In the next two posts I want to examine the economic plans of Hillary Clinton and Donald Trump to help you decide which one has a better plan to improve our economy.
The Hillary Plan
At a campaign rally in Kentucky this past May, Hillary Clinton declared she would put her husband, former President Bill Clinton, “in charge of revitalizing the economy, ‘cause you know he knows how to do it. And especially in places like coal country and inner cities and other parts of the country that have really been left out.”
It is true that the economy during the 1990s was far better than the one President Obama has presided over in the last eight years. Obama likes to say that’s because he inherited a recession from his predecessor, President George W. Bush. But that argument loses ground when you realize the recession was over in June, 2009. That’s seven years ago, Mr. President! The Obama recovery is the worst after a recession since 1949!
President Obama and his supporters try to blame this on the severity of the recession. But a recent study of economic recoveries after recession by Harvard economists Robert J. Barro and Tao Jin has concluded just the opposite. They say, “Empirically, the growth rate during a recovery relates positively to the magnitude of decline during the downturn.” In other words, the recovery after a severe recession should be more robust!
Fred Barnes, writing in The Weekly Standard explains the difference between the Clinton economy of the 1990s and the Hillary/Obama economy. Bill Clinton acted to spur private investment and growth. He provided regulatory relief, approved spending cuts, agreed to cut the tax rate on capital gains, and endorsed a balanced budget. The economy grew and flourished.
Hillary Clinton is embracing exactly the opposite – the policies of Barack Obama that have failed so miserably the last eight years. Barnes says, “Rather than cut regulations, she wants more of them. Government spending would skyrocket under her, especially to pay for roads and bridges. Tax rates would increase, chiefly for those earning more than $250,000 annually. A balanced budget? That’s not one of Hillary Clinton’s goals.”
(Just before this post was published, Hillary Clinton released her latest tax proposal which would increase the estate tax to 65% on the most wealthy estates. This is an increase from earlier proposals of only 45%. The Wall Street Journal says Clinton is now promising total tax hikes of $1.5 trillion over a decade.)
The progressives of the Democratic party like Obama and Hillary have embraced Keynesian economics, after the British economist John Maynard Keynes of the 1930s. Keynes taught that government spending would stimulate the economy and bring the country out of economic hardship.
But President Obama spent nearly a trillion dollars in his first term on so-called “shovel ready projects” with little or no economic growth. Hillary wants to continue this way of thinking with more government spending on infrastructure projects and solar energy. She says, “In my first 100 days, we will work with both parties to pass the biggest investment in new, good paying jobs since World War II. Jobs in manufacturing, clean energy, technology and invocation, small business, and infrastructure.” “Investment” is Democratic code for more government spending.
But government creation of jobs doesn’t stimulate the economy. It just redistributes wealth from the taxpayers to those who get the new jobs. This is more of the Obama pattern of government picking winners and losers in a professed attempt to grow the economy, but in reality a reward to those who have supported the Democratic Party.
Even more distressing is Hillary’s plan to increase taxes. At the Democratic convention in Philadelphia she boasted the tax hikes would pay for “every single one” of the government programs she is proposing. “And here’s how,” she said. “Wall Street, corporations, and the super-rich are going to start paying their fair share of taxes.”
This is just populism – telling the ignorant masses what they want to hear. In reality the U.S. corporate tax rate is the highest in the world at 35%, which is precisely why we are struggling to compete in a global economy and why so many of our corporations are taking their business and their jobs overseas. The top one percent of private individual earners are paying nearly 38% of all income taxes according to the IRS in 2015. Yet Hillary would have you believe they aren’t paying their fair share!
The proven way to increase economic growth is to lower tax rates, thereby increasing overall government revenues as more corporations and individuals earn more money and pay more taxes. This economic strategy has been a proven winner under presidents of both parties, including Kennedy and Reagan.
Barnes concludes, “By copying Obama’s policies, her presidency would, in effect, be his third term. She has denied Republican charges this would be the case. But at least on economics, her policies are clones of Obamas. This would all but guarantee slow growth and a weak economy.”
Why would Hillary reject policies emphasizing growth that worked for Presidents Kennedy, Reagan, and even her husband?
Barnes says the reason is the Democratic Party “has given up on growth,” according to Douglas Holtz-Eakin, the former director of the Congressional Budget office. “It’s all redistribution.” Rather than fight this, she has succumbed.
In other words, the Clinton plan of 2016 is to steal from the rich to give to the poor – and hope there are enough rich around to pay the bills. This has never worked in any country that has tried it. Unfortunately, that economic plan dooms us to economic stagnation or even recession for years to come.