Trade, Taxes, and What They Said: Trump v. Clinton on the Economy
The 2016 presidential election has largely been driven by personality. Since the day he announced his candidacy last June, Donald Trump’s combative verbal style has dominated headlines. Meanwhile, Hillary Clinton’s penchant for secrecy during her time as a Senator and Secretary of State has swamped her in controversy. Many people were relieved when last week proved more substantial. The two candidates delivered dueling economic speeches in Michigan, outlining their approaches to trade, taxation and entitlement programs. The speeches were not nearly as well covered as they should have been. Earlier in the week, Trump suggested that President Obama was affiliated with the Islamic State, later claiming that he had been sarcastic, and that “Second Amendment people” might have their own options for preserving gun rights under a Clinton administration. The suggestion that Trump had been calling for Clinton’s assassination cast a long shadow over the news cycle, crowding out the rival policy addresses. Nevertheless, the contrasting economic approaches Trump and Clinton presented are more important than the Republican’s provocative comments. The two candidates’ speeches reflected starkly different approaches to the role of government, especially when it comes to preserving the nation’s economic health.
Hitting on his signature issue from the beginning, Trump spoke about Michigan’s post industrial decline, which he blamed on trade deals like the North American Free Trade Agreement (NAFTA) and the pending Trans-Pacific Partnership (TPP). He vowed to cancel both arrangements, claiming that doing so would bring a flood of manufacturing jobs back to Detroit and other parts of the Midwest. Much of Trump’s criticism of trade focused on China. He vowed to label Beijing a currency manipulator, and expressed openness to heavy tariffs on Chinese goods. For Clinton, the speech gave her a chance to finally break away from her public support of the TPP as Secretary of State. Clinton had once asserted that the deal “would link markets throughout Asia and the Americas, lowering trade barriers while raising standards on labor, the environment, and intellectual property.” Her support of the TPP has haunted her for the past year. Bernie Sanders made opposition to trade one of his signature issues, and Virginia Governor Terry McAuliffe’s offhand comment suggesting that she would probably come around to the TPP as President aroused the ire of the Democrats’ left wing. In response, Clinton emphatically declared during her Michigan speech that “I oppose it now, I’ll oppose it after the election, and I’ll oppose it as President.” In an unusually Trump-like proposition, she suggested that she would impose an exit tax on companies offshoring jobs. The tone of the two speeches reflected a shift in trade’s role in electoral politics. Few American politicians are willing to declare support for free trade while speaking from the stump. But it has been many years since major candidates were so united in opposing deals like the TPP.
While Clinton and Trump struck similar notes on the TPP, their solutions to the poverty and unemployment that plague post-industrial areas were polar opposites. Trump plans to “bring back” lost industries such as steel by imposing tariffs and using other protectionist measures against China, which he accuses of stealing American jobs. Clinton, who opened her speech describing a visit to a nearby aerospace factory, talked more about nascent industries, focusing on the potential of advanced manufacturing. Like many Democrats before her, Clinton offered government programs to spur prosperity. She would expand financial support for two-year colleges and trade schools, mirroring President Obama’s more ambitious proposal to make community college free. Clinton would also use the tax code as a tool of industrial policy by creating a tax credit for companies that settle in impoverished areas. For his part, Trump took a conventionally Republican stance on government action, announcing that he would forbid federal agencies from issuing any new regulations. The proposal is derived from Vice Presidential nominee Mike Pence’s similar regulations moratorium as governor of Indiana,and fits in with longstanding Republican opposition to President Obama’s clean power plan. The 2016 election has been characterized as unique, and Trump as hardly Republican. But the two sets of solutions fall neatly into their respective ideological camps, with little of the overlap that could be expected from a truly disruptive electoral cycle.
After trade, taxation was the biggest theme in both speeches. As usual, the Republican and Democratic plans differed substantially on the issue. Despite striking a populist, pro-taxation stance during the primaries, Trump’s tax plan for the general election is conventionally conservative. He would have just three income tax brackets (12%, 25% and 33%) and would also repeal the estate tax, which taxes any inheritance over $5.4 million. Economists estimate that Trump’s plan would reduce federal revenue by $3 trillion over the next decade, drastically reducing the funding available for any and all federal programs. For her part, Clinton backed the Buffett Rule, a perennial Democratic favorite which would tax incomes over $1 million at an additional 30 percent, a related tax on multimillionaires. She also called to close the carried-interest loophole, taxing income from investments at the same rate as ordinary wages. While critics charge that the Buffett Rule is largely symbolic, closing the carried-interest loophole could raise up to $20 billion over ten years. As always, Democratic and Republican tax plans are a study in contrast.
The affordability of childcare is a rare point of nuanced policy difference between the two camps. Trump proposed that childcare expenses be made tax-deductible, enabling families to recoup the taxes they would have otherwise paid on part of their income. Clinton, whose goal is to cap childcare costs at 10% of a family’s income, instead favors expanding the existing Child Tax Credit, which enables families to deduct the overall cost of childcare (not just the taxes that would have been paid on it) from annual tax bills. She would make the credit refundable, enabling families who do not pay federal income tax to claim much larger benefits. This change could shift the demographics of families who benefit from the Child Tax Credit; 77% of benefits from the program currently go to families in the middle of the income spectrum, compared to just 13% for the bottom quartile. The difference between the Trump and Clinton plans could be enormous for Americans currently struggling to afford childcare.
Policy has taken a backseat this electoral cycle. The specifics of the two speeches will most likely be drowned out by the increasingly acidic war of words between Teams Clinton and Trump. But the importance of the contrast is difficult to understate. The two presidential candidates offer profoundly different visions of the role of government in the American economy, and the future of critical industries. True believers often charge that Trump and Clinton are essentially the same, making a choice between the two pointless. It is true that both candidates have embraced conventionally left of center and right of center approaches, not the revolutionary change their most fervent supporters demand. Nevertheless, the American people’s decision in November will be between two opposite approaches to the future of their economy. Unfortunately, that contrast has been lost in the churning of the electoral horse race.
