Know the Candidates Series: Hillary Clinton


C Adam Pfander

In the 2016 race for the White House, we turn our attention to former Secretary of State Hillary Clinton. Much like her Democratic counterpart Senator Bernie Sanders, the Clinton campaign is vocal in its rhetoric to reduce income inequality. Clinton, however, takes a much different tack in approaching this issue.

First and foremost, Clinton would raise the federal minimum wage to $12 per hour, while encouraging States to raise their minimum wage even higher. This plan is designed to boost incomes for working-class Americans, but is not completely beyond reproach. Some economists speculate that this higher minimum wage would be too expensive for rural areas, and would thus choke small businesses who cannot afford to raise wages. This pressure may be alleviated, however, by Clinton’s plan to reduce the tax burden for small businesses.

Beyond simply raising wages, Clinton wants to raise the aggregate productivity and job preparedness of American workers by making college education more affordable. This goal is epitomized in her “New College Compact,” which would make community college completely free, state college loan-free, and provide tax cuts up to $2,500 per student to alleviate the burden of paying for college. The Clinton campaign estimates an approximate $350 billion price tag for this program over the next 10 years – a tall order, which Clinton contends can be met by closing tax loopholes - an issue we will explore momentarily.

Turning away from the workforce, Clinton wants to invest heavily in American infrastructure. As President, Clinton would establish a National Infrastructure Bank, whose sole purpose would be to give funds to construction projects for roads, bridges, power lines, etc.. This type of financial support is designed to make infrastructure development easier and cheaper.

Economists normally love this type of investment spending. Better roads mean less cost, more efficient production and transportation, and ultimately, higher economic growth. However, in a recent poll of 22 economists conducted by National Public Radio (NPR), emotions are mixed. Some economists feel that the practical aspect of establishing a bank this size is too costly; others are not convinced that a bank is even necessary, when the federal government can just spend directly on investment.

How does Clinton plan to pay for these projects? Her main budget proposal is to simplify the tax code. Specifically, she wants to close the numerous tax loopholes that effectively allow corporations and the wealthy to pay lower taxes. In other words, Clinton feels that the federal government is leaving money on the table when it comes to tax revenue; she wants to get it back. In this manner, Clinton would increase the progressivity of the tax code. Economists, however, debate whether there is enough money left on the table to cover her proposed spending.

The Economics of Bernie Sanders

C Adam Pfander

Last week, the First Report briefly outlined the economic platforms of each of the major candidates – as well as one dark horse – in the 2016 presidential campaign. In the coming weeks, we will pick apart these positions and discuss their economic basis. To kick off this series, we take a closer look at Senator Bernie Sanders and his proposed plan to reduce inequality.

The backbone of Sanders’ economic agenda is a progressive tax plan. In this context, “progressive” is an economic term, not a value judgement, which means that the tax rates increase with income. A progressive tax system thus forces the wealthy to pay the lion’s share of taxes. To implement this plan, Sanders intends to expand the estate tax – the tax levied on inheritance exceeding $3.5 million; he also wants to increase taxes for big corporations and big banks.

With this newfound revenue, Sanders intends to fund numerous public projects. Most notable among these, he has pledged $1 trillion in public works investment. He plans to put an estimated 13 million Americans directly on the government payroll to build roads, bridges, dams, and other critical infrastructure. He has also announced a $75 billion a year college tuition plan, which would make public colleges and universities completely free, while cutting interest rates on student loans for private institutions. This latter program would be completely paid for, Sanders argues, by taxing speculative behavior on Wall Street.

The goal of these spending projects is to help the American workforce. The Sanders campaign has stated that his plan would lower the unemployment rate to below 4 percent, compared to the current level of 4.9 percent, while also bringing the long-term unemployed back into the labor force. Ideally, his education plan would also raise the productivity of the American workforce. Further, Sanders intends to raise the federal minimum wage to $15 per hour, a move designed to raise the standard of living for many American workers.

Sanders’ critics, however, have not embraced his ambitious, and undoubtedly expensive, economic agenda. Some economists speculate that he is overestimating his revenues while underestimating the burden of his newfound expenses, a combination that would add to the nation’s growing debt burden. Others – including New York Times columnist Paul Krugman along with four former chairs of the Council of Economic Advisers – disagree with the supposed benefits of Sanders’ economic plan. They contend that his forecasts for the unemployment rate are more conjecture than fact. Krugman went so far as to call Sanders’ claims, “voodoo” economics.

Finally, Sanders has made no secret of his hostility toward big investment banks. If elected, he intends to break up the largest investment banks and increase government oversight of Wall Street. These actions are designed to limit the risks Wall Street can take on, and thus protect our economy from financial collapse. However, critics –especially bankers – argue that Sanders’ regulation would reduce market efficiency; in avoiding the bust, we forestall the boom.

Decision 2016


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.