Earlier this week both Donald Trump and Hillary Clinton revealed the broad outlines of their plans for the American economy. Trump aims to accelerate growth, Clinton to redistribute the economic pie. Both have serious political problems. The Donald managed to trump his own economic plan with what could easily be taken as a threat on the life of Mrs. Clinton, and with an insistence that President Obama is "the founder of Isis", both of which attention-grabbers dominated the news and distracted attention from an economic plan containing some sensible ideas. The strategy of using outrageous statements to focus the media on one of sixteen candidates participating in the preliminary scrum that was the battle for the nomination seems to work less well in a two-person playoff.
Clinton has the problems of a lack of even a nodding acquaintance with the truth, and dependence on President Obama to continue his strenuous effort to deliver unto her the blacks, the young, and other members of his coalition, no easy thing given the number of people who think the nation is on the wrong track, and her own need to sympathize with voters who feel they have been left behind in the Obama years without criticizing the president—"We have more work to do" carries just so far.
In sum, Trump's almost infantile need for continuing attention compels him to make bizarre statement to garner attention—at the cost of attention to his policy proposals, the support of voters that the Republican Party once could count on, and raising questions about his, er, temperament. Clinton's insatiable need to prove that the rules don't apply to her leads her to destroy emails, blur the line between the State Department and the Clinton Foundation (her chief of staff at state went to New York to interview applicants for the lead job at the Foundation), risk national security by using an insecure server—at the cost of having two out of every three Americans tell pollsters they don't regard her as "honest and trustworthy".
Not a wonderful choice for voters who are counting the days until this election campaign grinds to an unlovely halt 87 days hence.
That choice was informed a bit by last week's dueling speeches. Trump chose Detroit as the venue for his economic-policy speech because he sees it as a victim of the globalized trading system and the free trade deals he abhors. In 1950, Detroit was home to 1.8 million Americans and sported the highest per capita income in the United States. Its population has since declined by over 60 percent, and large parts of the city are now derelict. Manufacturing jobs have fallen from 296,000 to 27,000 as the auto industry migrated to non-union states and other countries, the latter a testimonial, says Trump, to the need to scrap our trade deals with other countries, most notably Mexico, the new home of a Ford assembly plant that until now assembled small cars in suburban Detroit.
In addition to scrapping or renegotiating our trade deals, and rolling back the regulatory state, Trump would lower the federal corporate rate from the current nominal rate of 35 percent, the highest in the industrialized world, to 15 percent to end corporate flight, with that lower rate also applying to the business income of small entrepreneurs. The $2 trillion now parked overseas by US companies would be lured back by taxing it at a one-time bargain rate of only 10 percent, rather than 35 percent. These steps would make America "the investment destination of the world," enthused Larry Kudlow, a CNBC economic commentator and informal Trump adviser.
Trump would also repeal the gift and estate taxes, which Clinton calls a "Friends and Family Discount" that would benefit Trump's heirs to the tune of $4 billion, if indeed he is as rich as he claims, which she says we shouldn't believe unless he proves it by showing us his income tax returns. The top personal rate of 39.6 percent would be reduced to 33 percent as part of a plan to replace seven brackets with the three recommended by Republican Speaker of the House Paul Ryan, the man whose primary opponent Trump lavishly praised because he had kind words for the Donald: "I like you because you like me" is standard Trump fare. All taxpayers would get a tax cut, with those paying the most taxes—the "wealthy" and the "rich", pejorative as well as self-descriptive terms for Clinton—'saving the most. Trump advisers say that because his plan would stimulate economic growth and increase the government's tax take, it would add only $2 trillion over ten years to the federal debt, a mere one-quarter of the increase during the eight Obama years.
Trump also calls for a large program to increase and improve our infrastructure. With interest rates close to zero, "This is the time to borrow" to invest in Making America Great Again. Borrowing to pay for infrastructure is also high on the agenda of Democratic über guru Larry Summers and New York Times columnist Paul Krugman. In an example of Left meets Right, Krugman argues that "we need … sharply increased" infrastructure spending. "How should we pay for this investment? We shouldn't - not now, or any time soon. Right now there is an overwhelming case for more government borrowing." So Trump is for cutting taxes, and borrow-and-spend.
Clinton also chose Michigan as the politically correct venue in which to attack Trump's plan and unveil her own. She sees Michigan as the home for new, successful 21st century industries, building on Obama's decision to bail out General Motors and Chrysler. The auto industry is "having its best year ever," Clinton crowed. Unlike Trump, who calls for a moratorium on new regulations, she would expand the regulatory state to include tighter restrictions on fracking, the financial sector, and polluters. Rather than cut taxes, she would increase tax rates on the rich (annual incomes over $2 million) and what her supporters call "the very rich" (incomes over $5 million). And impose an exit tax on any corporation leaving for foreign climes, rather than follow Trump and create lower rates to keep them here in the first place. All of that would raise about $1.1 trillion over the next ten years "enough to pay for her proposed programs without blowing a hole in the budget", according to Clinton informal policy adviser and former Fed governor Alan Blinder. Rather than borrow-and-spend as Trump and leading Democratic economists advise, Clinton prefers the old FDR formula of tax-and-spend, with the taxes falling on what FDR's cousin, Teddy, called "malefactors of great wealth", the men responsible for causing financial panics.
The "proposed programs" to which Blinder refers include many that are the traditional stuff of Democratic plans to expand the state, and some new ones that would take America in that same direction:
-tuition-free college for the middle class and debt-free college for all;
-connecting every household to broadband by 2020;
-becoming the "clean energy superpower of the world";
-supporting (i.e. funding) union training programs;
-affordable child care available to all at a cost limited to 10 percent of their household income;
-introducing a government-operated health care system as an option under Obamacare;
-an increase in the minimum wage and federal subsidies to companies that pay a "living wage". "It's really simple," Clinton said earlier, "Higher wages (sic) leads to more demand, which leads to more jobs, which leads to higher wages."
Trump last week pointed out that if he loses, he will be returning to a wonderful life. That now seems likely: Some 60 percent of Americans do not think him qualified to hold the nation's highest office, Hispanics will vote against him in large numbers, he trails in key states he must win, and only 72 percent of Republican women plan to vote for him, far below the 93 percent who voted for Mitt Romney. Only two things can prevent Trump from returning to his previous life: a spectacular performance in the presidential debates, or the much-talked-of possibility (observed by this writer) that voters' who favor Trump are shying away from so advising pollsters.
Barring an amazing turnaround or flawed polling, it will be Clinton negotiating with a Republican congress come 2017. The threshold question is whether she will adopt the haughty manner of her predecessor, "my way or the highway", or sit down with Paul Ryan and congressional Republicans to cut a deal based on areas of possible agreement.
-Both parties are suspicious of long-standing trade policy, and Clinton's proposal to create a Chief Trade Prosecutor is not inconsistent with Republican support of free but "fairer" trade.
-Democrats long ago called for reducing the corporate tax rate to 28 percent from 35 percent, so Clinton wouldn't sacrifice her base by eventually coming around to corporate tax reform, a more likely area of agreement than anything to do with personal tax rates.
-Republicans, some from conviction, some from political calculation, want to reduce inequality, an important goal of a Clinton presidency.
-Both parties want to eliminate special tax benefits for hedge fund operators. If Hillary sticks to that assault on some of her major donors once she has taken the oath of office, treatment of carried interest as if it is a capital gain will receive a long-deserved erasure from the tax code.
-Both parties recognize the need for significant infrastructure spending relying in part on funds borrowed at historically low interest rates.
-Clinton knows Obamacare needs amendment, Ryan knows he can't repeal a measure that has provided coverage for 16 million Americans, but that he might be able to persuade the House to go along with certain needed reforms.
-Both recognize public unhappiness with political gridlock.
And both Ryan—and even more so Clinton—have been around long enough (Ryan was a mere eight years old when Hillary became first lady of Arkansas and started her and Bill's scandal-scarred political careers in earnest) to know that some of their goals are unattainable. It would take more money than even the Fed can reasonably print to subsidize renewables so that they can power every American home by around 2025, as Clinton wants to do, and Trump's plan to end the estate tax benefits too few people and represents a bonus for the winners of the sperm lottery rather than, as he believes, a tax on the deceased, who are in no condition to write a check to the IRS.
If Clinton proves to be the class warrior she seems to have become, disappointing potential business supporters, and congressional Republicans devote themselves to making her first term a failure, we face four more years of a political establishment incapable of confronting the nation's economic problems.