C Adam Pfander
Economists do not like to talk about voting; however, Election 2016 will undoubtedly be an economic decision. Each candidate brings their own vision for the shape of our economy – from the progressive tax plan of Bernie Sanders to the laissez faire ideology of Donald Trump. Here are the economic platforms for each of the major candidates.
The major tagline of the Sanders campaign is income inequality, and more importantly, how to shrink it. To achieve this goal, Sanders has laid out a progressive tax plan that places most of the burden on the wealthy. Most of this newfound tax revenue will stem from an expansion of the estate tax—the tax placed on inheritance. Sanders plans to use this money to fund a variety of government spending programs, including infrastructure investment (building roads and bridges), expansion of Social Security, and free public higher education along with substantial college-loan subsidization. Sanders is also known for his harsh stance toward Wall Street. If elected, he intends to break up the largest investment banks, curb the use of advanced and risky financial derivatives, as well as cut most Wall Street bonuses. Finally, Sanders wants to raise the federal minimum wage from $7.25 to $15 per hour by 2020.
Sanders is of course vying with former Secretary of State Hillary Clinton for the democratic ticket. As Sanders and Clinton are both ideologically liberal, they naturally share many common goals; where they differ, however, is in their approach. Clinton hopes to lower inequality by reducing tax loopholes – the means, by which many Americans as well as corporations avoid paying high taxes. She intends to use this revenue to provide tax relief for low-income families, cut interest rates on college loans, and invest in infrastructure. She also wants to raise the federal minimum wage from $7.50 to $12 per hour, as well as incentivize profit sharing within corporations – in this manner, employees would reap more benefits from their employer’s success. Finally, Clinton intends to tighten regulation on Wall Street. She does not go so far as Sanders, calling for a breakup of the major investment banks; she does, however, advocate for more stringent oversight and the limit of risky derivatives.
Crossing the aisle, we come to Senator Ted Cruz of Texas. As a Republican, Cruz takes a much more growth-oriented approach to economic policy, as opposed to the regulation-based approach favored by the Democrats. Cruz intends to eliminate any progressive tax code in favor of a flat tax rate; he also wants to simplify the tax code so dramatically as to render the IRS obsolete. This simplified, small income tax is designed to offer more wealth to everyday Americans, as well as give businesses the wherewithal to expand and – hopefully – hire more. Cruz also wants to eliminate regulations regarding small businesses, most notably Obamacare and provisions from the EPA; cutting this red tape would hopefully let Main Street businesses expand. Finally, Cruz has very specific monetary goals. He wants to audit the Central Bank and pass legislation regarding the pace of inflation. In this way, Cruz intends the Federal government to have a more active role in monetary policy.
And of course, we have the leading Republican candidate, Donald Trump. The business magnate is focused on a top-down approach that would loosen many restrictions on big business. He wants to cut taxes for corporations and the wealthy – the idea being that this increased private capital would allow them to hire and expand. He also wants to impose dramatic tariffs on any goods made overseas. This tax includes goods owned by American companies but assembled abroad like iPhones. This tax is designed to help American manufacturing. Further, Trump wants to not only balance the budget, but eliminate the $19 trillion deficit currently held by the federal government. The campaign has been silent, however, on how Trump intends to accomplish this lofty goal. Finally, Trump wants to repeal any restrictions on small businesses, especially Obamacare. His goal is to allow businesses to expand with almost zero intervention from the federal government.
After covering the big names from each party, we have one potential dark-horse to consider—former New York City Mayor Michael R. Bloomberg. This potential candidate boasts hefty name recognition among financial circles. His news outlet, Bloomberg LP, is the number one source of news on Wall Street. This proximity with the financial sector leads many to suspect that the multi-billionaire’s economic policy will be particularly market-focused. That being said, pending an official announcement, we cannot say definitively what Bloomberg’s economic goals are. However, we can glean hints from his time in the Mayor’s office. As Mayor of New York City, Bloomberg grew small business by generating investment opportunities for startups. He also grew New York’s tourism industry, a move that helped create a budget surplus in New York City. Bloomberg has set the first week of March as a self-imposed deadline to officially announce; we will see how his budding candidacy develops.