It’s a two-person presidential race now, which means voters will start hearing more about the candidates’ actual proposals—along with attacks on those proposals from the other side. Coming soon: Hillary Clinton’s planned takedown of Donald Trump’s ideas on business and the economy.
Yahoo Finance will be deconstructing the candidates’ campaign promises all the way through November. Here’s a starting primer on five economic ideas from the candidates that would probably do more harm than good.
Trade wars. Republican Donald Trump has attacked free trade as a centerpiece of his campaign, and business leaders are worried. Trump wants to rescind free-trade deals such as NAFTA, slap imports on a wide range of Chinese imports and punish nations such as China, Korea and Japan for keeping their currencies artificially low. The U.S. Chamber of Commerce warns that such policies would cause a recession within a year, and even if that's an overstatement, many economists say new tariffs would raise prices on a wide range of products, causing hardship for typical families. A better way to address concerns about jobs lost to trade might be to build new safety nets for those harmed by globalization and help funnel displaced workers into newer, healthier fields.
Continued class warfare. Hillary Clinton favors fairly traditional soak-the-rich tax reform that would raise taxes on the wealthiest Americans while cutting taxes for middle-class families. Everybody loves a tax cut and most Americans wouldn’t object to higher taxes on millionaires. But it seems likely that at least one Congressional chamber, the House, will remain under Republican control next year, and they’d almost certainly refuse to pass tax hikes of any kind. So Clinton, if president, could waste years pressing for the same kind of tax reform President Obama has failed to get through Congress. With the U.S. economy increasingly desperate for a tax overhaul making the system fairer and more efficient, the next president would do the most good by promptly pursuring some kind of tax reform actually able to get through Congress.
Doing nothing about corporate taxes. This is Part II of America’s tax conundrum. Many other countries have cut corporate tax rates to draw more multinational firms, and it’s working. The US corporate rate is now one of the highest in the developed world, which is a big reason US corporations have $2 trillion in cash parked overseas and keep seeking ways to domicile themselves outside the United States. Trump favors a cut in the corporate tax rate from 35% to 15%, but Clinton hasn’t taken a position on the distortions caused by the gap between US and foreign tax rates. Most economists favor lower US rates along with the elimination of hundreds of loopholes, which would make our tax code less complex and more competitive. In fact, this is one of the few things the government can probably do to directly stimulate the economy.