Monday, September 26, 2016
The following is my September 24, 2016 Op-Ed in The Orlando Sentinel. Enjoy tonight's debate...
As the United States inches closer to one of the most anticipated — and dreaded — elections in our nation's history, we should all be looking at which candidate can promote the most economic growth.
America's last recession ended in June 2009. Since then, the United States has endured the slowest economic recovery since World War II. While median incomes are finally rising, we are still below the earnings achieved before the last recession began. Unemployment is 4.9 percent, but we have the lowest labor-force participation rate in 30 years as millions of Americans have dropped out.
In the 1960 election, John F. Kennedy promised to create 5 percent economic growth. This was an astounding goal, given the three recessions that had occurred during the 1950s. 1n 1962, Kennedy called for a massive cut in corporate and personal income-tax rates. His tax plan passed in early 1964 and the 1960s saw his promise of 5 percent growth come true — all while federal tax revenues doubled.
Ronald Reagan pulled off the same results following the stagflation of the 1970s. His two tax cuts pushed the top income-tax rate from 70 percent to 28 percent and, along with his successful continuation of Jimmy Carter's effort to deregulate the economy, led to record economic growth and a near doubling of income-tax revenue.
While Trump should be commended for his recent proposal to lower income-tax rates and fight the growth of costly, and job-killing government regulations, his other ideas are so bad that any gains in economic growth from lower taxes and regulations will be more than offset by the economic costs created by his trade, immigration and social-welfare plans.
On trade, he wants to pull out of NAFTA, reject the Trans-Pacific Partnership and impose tariffs of 45 percent and 35 percent on China and Mexico, respectively. As reported recently in The Wall Street Journal, the Peterson Institute ran several models of his trade policies and found that this plan would lead to a recession within three years and as many as 5 million jobs lost.
Trump's vision of a border wall and deportation of nearly all unauthorized immigrants would, according to the American Action Forum economists, lead to an increase in the national debt by $400 billion while reducing the gross domestic product by $1 trillion as 11 million consumers and workers were sent packing. This 6.4 percent reduction in the labor force would also fuel inflation in housing and food as labor shortages lead to higher production costs.
Throw in his plan to expand Social Security benefits, and you have a recipe for exploding debt, economic contraction and higher unemployment rates.
Hillary — who apparently was not paying attention to her husband's highly productive economic policies from 1994-2000 — also deserves an F in economics.
After giving dozens of speeches supporting free trade, she now rejects open markets. Her trade policies are also projected by economists to be recessionary, but not as much as Trump's. She also proposes a massive increase in capital-gains taxes (her husband lowered the tax on investments to 20 percent, down from Reagan's 28 percent); higher marginal income-tax rates; an exit-tax on companies leaving America and more government spending on infrastructure.
Higher capital-gains taxes will reduce investments in new businesses or business expansion. Moreover, raising income taxes will not only not yield the revenue she thinks she will get, but it will slow the American economy. She claims the rich do not pay their "fair share" of income taxes, but according to IRS data, the top 5 percent of taxpayers already pay more than 50 percent of the tax burden.
America's 35 percent corporate income-tax rate is the highest in the industrialized world. Instead of raising this even more for companies planning to exit, Clinton should follow Ireland's lead and lower this rate so more companies will want to enter the United States.
Finally, from Franklin Roosevelt's New Deal through President Obama's 2009 stimulus package of more than $800 billion, we have seen promise after promise that government spending will create a multiplier effect and thus a booming economy. This concept has never produced the results predicted. Every $1 spent by government on a new bridge, for example, is $1 taken from a business or an individual that could have been spent on something else. We can see the new bridge and the jobs created building it. We cannot see the jobs lost from taking this money to begin with.
I sincerely hope that whoever wins this November will wise up and change his or her current plans. If the new president doesn't, the next four years will make us long for the slow-growth days of Barack Obama.