On Economic Policies, There Are Reactionaries, A Conservative And A Progressive

All the Republican candidates' tax plans head in the same direction-- an upward redistribution of wealth for the rich. In other words, regardless of which Republican you pick, if he or she is elected to the White House, the rich will get richer, the poor will get poorer and the middle class will continue to disappear. But Monday, writing for Politico, Ben White reported on why economists across the spectrum see Trump's plan as far worse than any of the other's. To start, were Trump's plan ever to be enacted, it would guarantee a recession, a recession who's most hard hit victims would be the morons who are most enthusiastic about how candidacy. Economists conclude that if Trump's plan is implemented prices for goods lower-income Americans depend on could soar due to his tariff barriers and a post-expulsion depleted low-end labor force would trigger an economic calamity. Mark Zandi, chief economist for Moody’s Analytics and an adviser to John McCain’s campaign: "[I]f Trump’s policies were enacted it would be some form of disaster for the economy. If you force 11 million undocumented immigrants to leave in a year, you would be looking at a depression. It would not help the people he is talking to, they would be the first to go down."

If 11 million immigrants were rounded up and removed from the country, many of the jobs they do-- including restaurant, hotel and low-end construction work-- could go largely unfilled, economists say. That would create a large and immediate hit to gross domestic product growth and the effects would ripple out to companies that supply goods and services to all those businesses. There would also be 11 million fewer people consuming goods and services, further driving down economic activity.

And on trade, Trump has argued for imposing big tariffs on goods imported from Mexico, China and elsewhere. The problem with this, many economists say, is the tariffs would ultimately be paid by U.S. consumers in the form of higher prices and would not lead to any significant increase in U.S. manufacturing.

“It’s a common mistake that people who don’t really understand economics make that this would somehow be a tariff on exporters,” said Mark J. Perry, a professor at the University of Michigan at Flint and a scholar at the conservative American Enterprise Institute. “It would be actually be a tax on American consumers. And more than half of U.S. imports come in as raw materials. And those cheap imports benefit American companies that hire American workers to finish the production process. Trump is really harkening back to the outdated mercantilist positions of hundreds of years ago.”

Part of the problem with Trump, economists say, is the rhetoric that informs the real estate billionaire’s policies and thrills his supporters, is not based on economic reality.

“I saw a chart the other day, our real unemployment-- because you have 90 million people that aren’t working,” Trump said last year. “Ninety-three million to be exact. If you start adding it up, our real unemployment rate is 42 percent.”

Trump appeared to be counting all Americans not in the work force. But that figure includes students, stay-at-home parents and retirees, among others. These people are not “unemployed,” they just don’t need or want to work and are not part of the labor force by choice. Even the broadest measure of unemployment, which takes into account the underemployed and those “marginally” attached to the labor force, is at 9.9 percent and falling, a figure not that far off of historic norms.

“He is just flat wrong about unemployment,” said Zandi. “Historically, even in the best of times and tightest of labor markers the underemployment rate is closer to 9 percent, and we will probably absorb that gap and be at full-employment by midyear.” The Trump campaign did not respond to requests for comment on his economic policies and statements.

Trump also late last year suggested the U.S. economy might be in a “bubble” that could burst at any time.

“Remember the word bubble? You heard it here first,” Trump said in Iowa in December. “We could be on a bubble and that bubble could crash and it’s not going to be a pretty picture,” said Trump. “The market has gone down big league the last couple of weeks. We could be in a big fat bubble and if that bubble crashes, it's a problem.”

Many economists say this is a misreading of the U.S. economy. Growth has been sluggish-- moving forward at only around 2 percent-- but there are very few signs that there are any bubbles with the possible exception of high-end commercial and residential real estate in certain markets, an area that Trump knows well.

“There is little chance that the U.S. economy is a bubble. Retail sales and manufacturing output have looked dismal for months, despite lower oil prices,” said Megan Greene, chief economist at Manulife. “Most analysts are revising their economic forecasts for the U.S. for 2015 and 2016 down-- not up-- to reflect poorer economic performance than expected. It is hard to see where the demand for a macroeconomic bubble in the U.S. might come from given generally low global aggregate demand.”

Democrats, meanwhile, see an opening to appeal to Trump voters by acknowledging the struggles they face while arguing that the billionaire’s policies would be ineffective in driving faster growth or addressing economic inequality.

Former Secretary of State Hillary Clinton has spent much of her campaign talking about plans to invest more in infrastructure, boost some capital gains taxes and provide tax credits to companies that share profits more broadly with employees.

Vermont Sen. Bernie Sanders has made more direct appeals to Trump voters. “What I’m suggesting is that what Trump has done with some success has taken that anger, taken those fears-- which are legitimate-- and converted them into anger against Mexicans, anger against Muslims,” Sanders said on CBS last month. “For his working class and middle-class support, we can make the case that if we really want to address the issues that people are concerned about. We need policies that bring us together, that take on the greed of Wall Street the greed of corporate America and create a middle class that works for all of us rather than an economy that works just for a few.”

Democratic-leaning economists say Trump is most vulnerable to attacks that his tax plan would deliver massive benefits to the wealthiest Americans. According to the Tax Policy Center, Trump’s tax plan would reduce federal revenue by $9.5 trillion over the next decade. It would also provide an average $1.3 million tax cut for the top 0.1 percent of earners, the Tax Policy Center found. The Trump campaign has disputed these findings.

Polls consistently show that voters of all partisan stripes favor tax hikes rather than tax cuts on the rich. And that leaves Democrats salivating at the idea of taking on Trump this fall.

Which brings us to Hillary's latest effort to try to sound like a progressive while still representing the interests of the status quo establishment that bankrolls her career. Greg Sargent looked at her new plan tax plan for his Washington Post readers yesterday and saw right through it. Yes, yes, she's better than Trump, if that bar is how low you want to go. She's positioned herself between the Republicans who do not believe in progressive taxation and Bernie, who does. She's trying the ole split the difference routine, as usual.

Clinton’s new proposal would impose a four percent “surcharge” on those who make more than $5 million per year, a Clinton aide says. The Clinton campaign estimates that this would hit two out of every 10,000 taxpayers, and raise over $150 billion over ten years.

The hook for this new move is the recent announcement from the IRS that in 2013, the 400 highest-income taxpayers paid an effective tax rate of only 23 percent, due to lower rates on capital gains and other loopholes.

Clinton’s new plan is designed to target the income of the wealthiest taxpayers in a way that gets around any such efforts to pay lower rates, according to Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center.  To do this, it would impose a hike of four percentage points on whatever effective rate each of these top taxpayers currently pays.

“This is an attempt to say, ‘okay, if you have really high income, no matter what you’re paying now, we’re going to add four percentage points to it,'” Williams tells me. “It’s a blunt instrument. But it’s straightforward and simple.”

The Clinton campaign claims this will help ensure that “the richest Americans pay an effective rate higher than middle-class families.” This has been a longtime goal of Democrats who have pushed the “Buffett Rule” and other similar measures designed to ensure that top earners’ effective overall tax rate does not remain lower than that paid by middle class taxpayers.

...[A]ll expectations are that Sanders’ plan will go farther in raising the top marginal tax rate paid by high earners. “I would say Clinton’s four percentage point surcharge is going to collect a lot less revenue from wealthy people than the kind of plan Sanders is talking about in broad brush terms,” Williams says.

If that proves true, that may be how Clinton wants it. Though Clinton insists her plan to regulate Wall Street is superior to Sanders’ proposals-- [a silly and unserious] claim endorsed by Paul Krugman [likely made while he was on a bad acid trip]-- Clinton has not diectly embraced a number of the more dramatic proposals favored by the Sanders/Elizabeth Warren wing of the party, such as expanding Social Security and hiking the federal minimum wage to $15 per hour. Sanders has talked about middle class tax hikes to fund some of his programs, while Clinton has ruled that out.

So it’s plausible to surmise that Clinton may be looking for a middle ground on high end taxes, too-- hitting the very wealthiest taxpayers with higher effective rates, but not going after the wealthy nearly as ambitiously or comprehensively as Sanders hopes to do with higher marginal rates on a much bigger pool of taxpayers.

Neither Trump, nor any of the other Establishment candidates (including Hillary) are going to do anything to make America substantively better. Trump-- and to varying degrees, all the Republicans-- would make it worse. Hillary is the status quo candidate. It's worth backing Bernie as the only candidate who would work to make real improvements that would impact real families. And, as he always says, he can't do it alone. He needs our help.