Michael Boskin of Stanford Univ sums up the different economic strategies:
With so much uncertainty, there are a number of directions that US policy could take in the coming years. While a lot of attention has been paid to headline-grabbing issues like immigration and national security, American voters are highly concerned about economic issues – concerns that the leading candidates would address in very different ways.
On trade, Trump’s ideas are dangerous and would reverse decades of beneficial bipartisan American leadership in trade liberalization, with large tariffs on foreign imports, such as from China and Mexico. The other Republican candidates barely discuss the topic. As for the Democrats, Sanders inveighs against free trade. Clinton has flip-flopped on the issue: She now opposes Canada’s Keystone XL pipeline and the Trans-Pacific Partnership, which she promoted as Secretary of State. The risk of a trade war is low, but rising.
Clinton has also inched toward Sanders’s position on financial-system reform, as his attacks on her for taking large donations and speaking fees from Wall Street have clearly struck a chord among young voters. Confronting the big-bank bogeyman has been a centerpiece of Sanders’ campaign; Clinton is now partly echoing his populist anti-bank positions. The Democrats favor loose monetary policy, low interest rates, and a depreciated dollar. Republicans also oppose bailouts, but worry about excessively loose monetary policy and too much discretion for the US Federal Reserve outside real emergencies.
These differences will have a far-reaching impact. By appointing a new Fed Chair (or reappointing Janet Yellen), and possibly other Fed governors, the next president will have an indirect influence on interest rates, exchange rates, and global financial markets. If inflationary pressures rise – unlikely any time soon, but possible when the global economy gains strength – the Fed’s response will be a key determinant of economic stability.
The candidates also differ enormously in their tax and spending plans – and thus their deficit and debt proposals. Sanders is proposing about $18 trillion of additional spending over the next decade to cover a single-payer health-care system, infrastructure investment, and “free” (that is, taxpayer-paid) tuition at public colleges. During that period, he would impose tax hikes of $6.5 trillion, mostly on the “wealthy.” The catch: Democrats define “wealthy” as an annual household income above $250,000 – roughly the starting salary of an urban couple in their first jobs after law school. The $11.5 trillion deficit would eventually have to be covered by a gigantic future tax hike. Clinton has similar spending and tax priorities, though with smaller increases.
The Republicans want to lower personal income tax rates and broaden the tax base. They would reduce America’s corporate-tax rate – the highest in the OECD – to a far more competitive level. Some propose replacing the current personal and corporate income taxes with a flat tax on consumption. The Republicans would slow growth in spending in most areas, while increasing defense spending. Whereas Trump proposes an outsize $10 trillion in tax cuts and Cruz about $9 trillion (statically scored), Rubio and Kasich have offered more economically and arithmetically plausible fiscal plans. Campaign proposals are, of course, partly aspirational, and will have to be negotiated with Congress.
The economy joyride expected to continue…