The Democratic nominee Hillary Clinton and the Republican Donald J.Trump had their final face off in the 2016 presidential race. It appears that the economy was a central point for the election. Economic policy is a driving force in the decision to keep Americans happy, with Donald Trump’s vision of creating a dynamic and booming economy, that will create 25 million new jobs over the next decade. A figure that has excited many voters, especially those that have suffered from redundancies through a contracting economy. Over the last seven years, 13-14 million people have left the labour force due to the financial crisis and a slowdown in market activity, the lowest labour force participation rate since the 1970s.
However, do the statements made by Donald trump suffice?
The recovery that Barack Obama has achieved through his administration, the act of injustice in statistics seems to fall through to many Americans who have not yet heard the real story. Obama’s policies helped the country recover from what can be described as the worst period of economic turmoil since the Great Depression of the 1930s. More than eight million jobs have been created since he took office, a statistic that makes him the fifth best job-creating President in U.S. history. But he actually created more jobs than that.
Unemployment continued to rise even after the recession was over. After an event like the financial crash experienced in 2008, it takes some time before businesses are confident enough to start hiring again. As a result, the economy continued to lose jobs until January 2010. If you add up all the jobs created since then, it totals 13.3 million jobs. That would make Obama the fourth best job creator among Presidents. Yet the Republicans seem to bully their way through the polls, with victories that take up to 50% of American votes.
Trump’s economic policy goes on to tackle key issues regarding American households in the labour force, once described as 1 in 5 Americans do not have a single-family member working. Nevertheless, it is also true that labour participation has fallen considerably. That fact moderates the unemployment accomplishment. But by how much?
An indicator that takes the participation rate into account is simply the growth in the number of employed people. The Obama administration can claim 76 consecutive months of job growth. That is impressive, but the rate of job growth during his administration, given the falling participation rate, comes to only 1 percent. Only three presidents have had lower job growth rates (Bush Senior and G.W Bush as well as Eisenhower).
The US economy grew only by 1.1% in the second quarter of this year. With the 2008 financial crisis still playing a part in consumer spending, with many spending less, it’s the weakest recovery since the great depression.
Can Hillary supply the goods needed for tackling the ongoing slowdown in growth?
Hourly earnings are lower than they were in 1973. Hillary’s plan of increasing taxes for people who make over $5 million a year by 4% (fair share surcharge). Which potentially damaged the votes from the executive voters within America. This does not go too well, along with the plans of introducing an exit charge, for companies that move their headquarters overseas to pay less tax. Corporations will be frustrated with such measures, although it is the right policy to introduce it could have lead to voters swinging towards Donald’s Trump Republicans.
In comparison, Donald Trump will introduce a cut in corporation tax, a plan to aid businesses on a global scale. Tax levels are currently around 39%, but many companies pay less with Goldman Sachs stating that ‘’S&P 500 companies pay 29%’’. According to Tax policy centre (TPC), Trump’s plan will increase investments for businesses and individuals but the benefits will offset if there is a considerable increase in federal spending. However, Trump’s plans include vast amounts of spending which in turn could damage the US economy even further. That type of spending would increase national debt by 80% of GDP by 2036, according to TPC findings.
In contrast to Donald’s plans, Hillary’s economic plans in relation to tax will in turn decrease investments from the top earners, with a reduction in disposable income in order to invest in the US economy. The plan will reduce the federal deficit, thus will not deviate from Obama’s reduction plan. An unexpected swing in economic plans can hinder the economic expectations and thus lead to negative expectations, therefore leading to a drop in the US dollar in the short-term. TPC expects Hillary’s plans to raise marginal tax rates on labour and capital leading to incentives to work, save and invest among high-income households. In addition, the US economy can expect sustainable economic growth. The federal revenues will increase by $1.1 trillion over the next 10 years and will slow down public accumulation of public debt.
What measures would the candidates take in relation to tackling the reduction in participation rates across the US?
Clinton has introduced plans to invest in infrastructure, leading to a growth in job creation, with more buildings and operations being introduced. A common supply sided economic plan that can increase employment in the long-term. Clinton has emphasised ending ”quarterly capitalism” which focus on returns to shareholders, many economists calling this a dangerous move. A risky plan as a democrat to introduce measures in unleashing the power of the private sector to create more jobs at higher pay. Which could involve creating an infrastructure bank to get private funds off the side-lines and complement private businesses.
A plan many see as adventurous, but does Donald Trump have a plan that can tackle such a strong problem in US economy?
The Answer is NO, for instance Trump wants to decrease regulation on energy production to create mining and energy related jobs, a decreasing sector in the US economy over the recent years. The reasons behind such a decrease are unknown.
The financial crises lead to such a reduction in the global economy, regulations of unmanageable greed and sheer irresponsible lending has made the US economy better in tackling issues. However, it needs to be dynamic and firm in tackling issues relating to banking. Clinton has empathised that she would ‘’strengthen regulation on financial institutions and also crack down on financial lending from the show banking sector’’. Also, reducing compensation to executives at financial institutions, in the event of fines from regulators.
Trump believes the opposite should be placed and the government should repeal the Dodd-Frank regulation, saying that it prevented banks from lending to average Americans, calling for a pause in all new regulation and a review of the existing regulation. This could lead to deregulation and thus leads to bankers regaining power at levels similar to pre-recession periods. This could lead to irresponsible lending in which sales figures are only looked into but not properly evaluated to determine whether individuals have the ability to pay back loans.
The two candidates have very different stances in relation to trade policies, Trump has taken up a very strong protectionist stance. Suggesting that a 45% tariff on all Chinese imports would be in his plans. This can be a bold move, with many of US imports originating from China.
Donald Trump has the idea that china is ”sucking us dry”, explaining that America will cut a better deal with China that helps the American people and businesses to compete. However, as many economists are aware China’s advantages over America in many industries allows China to operate in the export markets. This move could see China and the US go into trade-war, consequently this may not be beneficial for the American economy. Clinton’s plans are less regressive with the candidate stating that she will ”stop any trade deal that kills jobs or reduces wages, including the trans-pacific partnership”. However, such a stance against foreign trade should be retracted according to reports from The Economist.
Economists explain that changes in the economic outlook can deeper the economic position of a country, the same idea that Brexit has dampened the economic growth in the UK. When expectations are negative and thus a drop in the currency of that particular country. In the United States this is a negative outlook in S&P 500, shareholders will thus spend less on investing and jobs tend to reduce with the currency lacking stimulation.
The creation of jobs is key in today’s world, therefore, introducing a president that aims to change many job-creating policies that have been worked on by the country’s predecessor can lead to negative thoughts by markets. The economy is seen as fragile and Clinton’s plan would roughly maintain the status quo from President Obama’ tenure, which will provide the certainty that markets like by giving the economy and the country continuity in turbulent times.
The chief fixed income economist James Sweeney at Credit Suisse stated in one report that ”our expectations for a Clinton presidency do not require changing our outlook for growth, policy, earnings and inflation”. If Clinton’s economic policy are introduced, the US economy could kerb uncertainty and thus produce some growth that is very much-needed.
Economists have taken more extreme views of Trump plans.
Chief economist at HSBC expresses that ”while tax cuts that were implemented in the first year of Trump administration might give a GDP boost in the short run, the combined supply shock from a contraction in the labour force and from the disruption in international trade would likely put the economy into a recession after a year or so”.
I hoped many Americans would make the right decision, to stop the economy from suffering from negative shocks that can lead to a worsen position. Mrs Clinton is far from a finished article, but she could have delivered for the American people and many show that ordinary politics works for ordinary people, the sort of renewal that American democracy requires.