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A brief outline of US Presidential Candidate proposed policies follows. The post-election policy implementation will of course rely almost entirely on congressional support. With the current projected constituency of the House of Representatives being majority held by Republicans, Hilary Clinton will find it increasingly difficult to pass legislation and implement drastic policy changes. Conversely, and perhaps perversely, Trump’s passing of policy through congress will be met with less resistance.
The forecasting of candidate Trump’s policies is difficult with a non-existent political background in contrast to Hilary Clinton’s thirty-odd years and recent tenure as Secretary of State. In addition, Trump’s nature gives rise to an inconsistency in proposed policy.
Hilary Clinton
Clinton’s policy has concentrated on a reduction in income inequality, assisting illegal aliens to legally remain in the US, rejection of the Trans-Pacific Partnership and four year in-state tuition free for students with household annual income less than $125,000.
Tax-policy
An increase in income-tax rates for high-income earners to fund government spending. Top quintile average federal tax rate increase of 1.3% to 26.8%, including a five-percent increase for those in the top 0.1%. An increase in the estate tax rate and reduction in threshold (current: 40% of $5,450,000 threshold / proposed: 45% of $3,500,000). An estimated 4 out of every 1000 estates will be affected, producing $161 billion of revenue. Capital Gains tax rate increase (current: 23.8%); this could cause an immediate reduction in Federal revenue if taxpayers postpone the realisation for a more favourable rate. Corporate tax rates are unlikely to be changed – although there is a possibility of an ‘exit tax’ for companies locating outside the US and a push to limit tax inversions. These policies are unlikely to materialise as it they would have to be passed through a majority Republican House of Representatives, if passed they are expected to produce an increased revenue of $1.1 Trillion.
Infrastructure spending
Public investment is currently at its lowest level since WWII – reinforcing the need for infrastructure investing which has been acknowledged by both candidates. Clinton has proposed a $275 Billion plan to be implemented in her first 100 days in office including $230bn in infrastructure spending over 5 years. The creation of an independent , government-owned infrastructure bank – aim to leverage $25bn equity to finance an additional $225bn worth of public and private investment. Restoration of Build American Bonds to help local governments attract private capital, at an estimated cost of $20 Trillion. The implementation of this policy is likely to have a positive long-term impact on US productivity. As there is currently a $1 Trillion infrastructure deficit in the US, further measures are likely necessary.
Education
Clinton’s policies aim to reduce the cultural and economic barriers to obtaining a college degree. Student debt currently sits at $1.2 Trillion approximately $30k for each graduate. Under Clinton’s policy, no graduate would have to pay more than 10% of annual income and all debt would be forgiven after 20 years. Furthermore, Clinton proposes to implement an additional exception to those making an active contribution to their community in their work. Under Clinton’s policy, families with less than $125,000 of income will be able to attend an in-state four year public college or university course at no cost. All community colleges would be free. The implementation of this policy would likely increase consumer spending and home purchases by graduates who are currently weighed down by excessive college debt.
Minimum Wage
Raise minimum wages from $7.25 to $12 through federal legislation. The current purchasing power of a minimum wage worker stands at 35% of an average US worker, less than the 50% purchasing power of minimum wage workers in the mid-to-late 20th century. Although minimum wage legislation is unlikely to be passed at a federal level 29 states have sought to raise minimum wages. The progressive raising of minimum wages to $12/hour would impact 35 million workers while the net impact on the overall level of employment is projected to be neutral.
Entitlement Programs: Social Security and Medicare
Clinton proposes an expansion in social security benefit; in particular for Widows and those who have taken time off to act as a caregiver. Congress is likely to opposed to further deficit to fund an expansion in social security with an ageing population already likely to weigh on the budget deficit. In addition Clinton has vowed to retain the Affordable Care Act with no meaningful changes. In relation to reining in expenses – the responsibility will lie with pharmaceutical companies and regulators.
Trade
Clinton has back-flipped and has shown her opposition to the Trans-Pacific Partnership (TPP) Agreement. The withdrawal from the TPP would more likely cause political issues than economic as the US will have less ability to influence trade procedure and legislation while contributing only a 0.1% increase in real income and 0.07% increase in employment by 2032. Clinton may well renegotiate certain aspects of the TPP and then again put forth the agreement for passage as her foreign policy looks to bolster the countries standing as a world power.
Immigration
Promised to reform immigration in her first 100 days. Her policy concentrates on allowing undocumented illegal aliens to stay in the US lawfully (she has not outlined how she proposes to do this). This move is expected to boost GDP and tax base with the positive impact being long-term in nature.
Foreign Affairs
Clinton’s tenure as Secretary of State presents a relatively clear framework for analysing her view on foreign policy, actions will ultimately depend on how events unfold globally and whether or not the US faces threats from abroad.
Financial Regulation
A further reduction in systematic risks and a tightening control over the shadow banking system and the hedge-fund industry through further regulation. A risk-fee levied on the largest commercial banks and some risk insurers. Not a return to Glass-Steagall Act but a strengthening of the Volker Rule through restrictions in leverage and liquidity requirements.
Donald Trump
Trump’s policy concentrates on issues of immigration and the returning of jobs to the American people. He plans to accomplish this through mass deportations and the implementation of taxes as well as tariffs on US multinationals.
Tax Policy
Trump’s tax policy proposes a signifiant reduction in the marginal tax rates on individuals and business. This will obviously come with a high cost to the federal budget which Trump proposes to partially fund through stricter rules on Corporate tax inversions as well as other similar regulation. Currently, $750 Billion in cash and nearly $2.3 Trillion is indefinitely reinvested in foreign earnings from S&P 500 companies. Furthermore, profit shifting by US multi-nationals reduce US government tax revenues by more than $100 billion each year. This has increased 5-fold over the past decade. Corporate Tax rates would be reduced to 35% while income-tax brackets would reduce to a three tier (12%, 25% and 33%) policy. These, coupled with the elimination of Alternative minimum Tax, an increase in standard deduction, capping of CGT and Tax on dividends at 20% and an elimination of tax on investment income of high-income households produce a $6.5 Trillion reduction in Federal Government Revenue.
Immigration
A stringent national security strategy involving mass deportations and stricter immigration rules to improve jobs and wages for all americans. Constituents of the policy include “The Wall”, triple the number of immigration enforcement officers, deportation of criminal aliens, the end of birthright citizenship, mandating nationwide use of E-verify program, raise penalties for overstaying visas and a temporary ban on muslims. The policy contains an estimated $50-$350 billion outlay over the next ten years. Immigrants represent 16.5% of US labour force and 14% of US population. Stricter immigration policy could therefore have a profound impact on labour supply, the housing market and consumption.
Trade
Trump has been critical of most trade deals and labels China (a major trade partner) as a currency manipulator, explaining the need to propose a cash before the WTO on China for illegal export subsidies. Threatening to impose a 45% tariff on Chinese imports. In addition Trump has suggested a restriction on Mexican exports, proposed a 35% tariff on US multi-national corporations that outsource manufacturing abroad. The US currently has 14 free-trade agreements with 20 countries. Half of US goods go to free-trade partner countries.
The forecasting of candidate Trump’s policies is difficult with a non-existent political background in contrast to Hilary Clinton’s thirty-odd years and recent tenure as Secretary of State. In addition, Trump’s nature gives rise to an inconsistency in proposed policy.
Hilary Clinton
Clinton’s policy has concentrated on a reduction in income inequality, assisting illegal aliens to legally remain in the US, rejection of the Trans-Pacific Partnership and four year in-state tuition free for students with household annual income less than $125,000.
Tax-policy
An increase in income-tax rates for high-income earners to fund government spending. Top quintile average federal tax rate increase of 1.3% to 26.8%, including a five-percent increase for those in the top 0.1%. An increase in the estate tax rate and reduction in threshold (current: 40% of $5,450,000 threshold / proposed: 45% of $3,500,000). An estimated 4 out of every 1000 estates will be affected, producing $161 billion of revenue. Capital Gains tax rate increase (current: 23.8%); this could cause an immediate reduction in Federal revenue if taxpayers postpone the realisation for a more favourable rate. Corporate tax rates are unlikely to be changed – although there is a possibility of an ‘exit tax’ for companies locating outside the US and a push to limit tax inversions. These policies are unlikely to materialise as it they would have to be passed through a majority Republican House of Representatives, if passed they are expected to produce an increased revenue of $1.1 Trillion.
Infrastructure spending
Public investment is currently at its lowest level since WWII – reinforcing the need for infrastructure investing which has been acknowledged by both candidates. Clinton has proposed a $275 Billion plan to be implemented in her first 100 days in office including $230bn in infrastructure spending over 5 years. The creation of an independent , government-owned infrastructure bank – aim to leverage $25bn equity to finance an additional $225bn worth of public and private investment. Restoration of Build American Bonds to help local governments attract private capital, at an estimated cost of $20 Trillion. The implementation of this policy is likely to have a positive long-term impact on US productivity. As there is currently a $1 Trillion infrastructure deficit in the US, further measures are likely necessary.
Education
Clinton’s policies aim to reduce the cultural and economic barriers to obtaining a college degree. Student debt currently sits at $1.2 Trillion approximately $30k for each graduate. Under Clinton’s policy, no graduate would have to pay more than 10% of annual income and all debt would be forgiven after 20 years. Furthermore, Clinton proposes to implement an additional exception to those making an active contribution to their community in their work. Under Clinton’s policy, families with less than $125,000 of income will be able to attend an in-state four year public college or university course at no cost. All community colleges would be free. The implementation of this policy would likely increase consumer spending and home purchases by graduates who are currently weighed down by excessive college debt.
Minimum Wage
Raise minimum wages from $7.25 to $12 through federal legislation. The current purchasing power of a minimum wage worker stands at 35% of an average US worker, less than the 50% purchasing power of minimum wage workers in the mid-to-late 20th century. Although minimum wage legislation is unlikely to be passed at a federal level 29 states have sought to raise minimum wages. The progressive raising of minimum wages to $12/hour would impact 35 million workers while the net impact on the overall level of employment is projected to be neutral.
Entitlement Programs: Social Security and Medicare
Clinton proposes an expansion in social security benefit; in particular for Widows and those who have taken time off to act as a caregiver. Congress is likely to opposed to further deficit to fund an expansion in social security with an ageing population already likely to weigh on the budget deficit. In addition Clinton has vowed to retain the Affordable Care Act with no meaningful changes. In relation to reining in expenses – the responsibility will lie with pharmaceutical companies and regulators.
Trade
Clinton has back-flipped and has shown her opposition to the Trans-Pacific Partnership (TPP) Agreement. The withdrawal from the TPP would more likely cause political issues than economic as the US will have less ability to influence trade procedure and legislation while contributing only a 0.1% increase in real income and 0.07% increase in employment by 2032. Clinton may well renegotiate certain aspects of the TPP and then again put forth the agreement for passage as her foreign policy looks to bolster the countries standing as a world power.
Immigration
Promised to reform immigration in her first 100 days. Her policy concentrates on allowing undocumented illegal aliens to stay in the US lawfully (she has not outlined how she proposes to do this). This move is expected to boost GDP and tax base with the positive impact being long-term in nature.
Foreign Affairs
Clinton’s tenure as Secretary of State presents a relatively clear framework for analysing her view on foreign policy, actions will ultimately depend on how events unfold globally and whether or not the US faces threats from abroad.
Financial Regulation
A further reduction in systematic risks and a tightening control over the shadow banking system and the hedge-fund industry through further regulation. A risk-fee levied on the largest commercial banks and some risk insurers. Not a return to Glass-Steagall Act but a strengthening of the Volker Rule through restrictions in leverage and liquidity requirements.
Donald Trump
Trump’s policy concentrates on issues of immigration and the returning of jobs to the American people. He plans to accomplish this through mass deportations and the implementation of taxes as well as tariffs on US multinationals.
Tax Policy
Trump’s tax policy proposes a signifiant reduction in the marginal tax rates on individuals and business. This will obviously come with a high cost to the federal budget which Trump proposes to partially fund through stricter rules on Corporate tax inversions as well as other similar regulation. Currently, $750 Billion in cash and nearly $2.3 Trillion is indefinitely reinvested in foreign earnings from S&P 500 companies. Furthermore, profit shifting by US multi-nationals reduce US government tax revenues by more than $100 billion each year. This has increased 5-fold over the past decade. Corporate Tax rates would be reduced to 35% while income-tax brackets would reduce to a three tier (12%, 25% and 33%) policy. These, coupled with the elimination of Alternative minimum Tax, an increase in standard deduction, capping of CGT and Tax on dividends at 20% and an elimination of tax on investment income of high-income households produce a $6.5 Trillion reduction in Federal Government Revenue.
Immigration
A stringent national security strategy involving mass deportations and stricter immigration rules to improve jobs and wages for all americans. Constituents of the policy include “The Wall”, triple the number of immigration enforcement officers, deportation of criminal aliens, the end of birthright citizenship, mandating nationwide use of E-verify program, raise penalties for overstaying visas and a temporary ban on muslims. The policy contains an estimated $50-$350 billion outlay over the next ten years. Immigrants represent 16.5% of US labour force and 14% of US population. Stricter immigration policy could therefore have a profound impact on labour supply, the housing market and consumption.
Trade
Trump has been critical of most trade deals and labels China (a major trade partner) as a currency manipulator, explaining the need to propose a cash before the WTO on China for illegal export subsidies. Threatening to impose a 45% tariff on Chinese imports. In addition Trump has suggested a restriction on Mexican exports, proposed a 35% tariff on US multi-national corporations that outsource manufacturing abroad. The US currently has 14 free-trade agreements with 20 countries. Half of US goods go to free-trade partner countries.
