Hillary Clinton Economic Plan – Part 2

Hello readers!  This is the review of the Clinton economic plan.  It’s the final part in what has been an incredibly laboring article series.  I’ve always researched my candidates for election and spent a few hours doing so.  However, to double back and then check sources, facts, and figures only to really dissect the potential economic outcomes was a lot of time.  All told, I spent seven hours researching Trump and another seven writing the articles; for Clinton, I spent about 10 hours researching and 10 hours writing the articles.

As I discussed in Part 1, Clinton’s tax policy should raise government revenues by $1.1Trillion over 10 years.  This is a key component of her overall vision.  She has plans and ideas to revamp nearly every facet of American economics and social norms.  As some commenters have brought up, it will likely be a struggle to pass these kinds of tax reforms.  Consequently, it will be even harder to shape the country like she wants without more deficit financing if she doesn’t get those tax reforms.  To add more trouble Obama apparently had a tense meeting at yesterday’s G20 Summit.  The word on the street is that he and China’s President, Xi Jinping, had a bumpy start on talks of protectionist views and unfair trading practices.  China is one of our largest financiers of deficit spending, as they are one of the largest buyers of available Treasury Bonds.  Shaking up the politics now, could lead to financial consequences later.

With all that on our mind though, let’s dig into the Clinton economic plan!

The Clinton View on Jobs

One of the most striking things to me about the Clinton campaign, when it comes to jobs, is their grammar.  Sounds weird right?  However, Clinton has made a concerted effort to always say “good-paying jobs” instead of “well-playing jobs”.  Good is an adjective – it modifies nouns.  Well is an adverb, it qualifies or quantifies an adjective.  Thus, Clinton is effectively saying she wants to increase the number of good jobs that pay, rather than the number of jobs that pay well.  The modus operandi here is the job.  Now when I think of a “good job that pays”, I think of a job where I’m treated well, the benefits are comparable for the work performed, and I’m paid adequately for my skills.

Consequently, Clinton starts her campaign promise with the push to raise the minimum wage to $12.  That in itself could be very damaging to small business whose profit margins tend to be larger, but client pool is lower.  However, she promises to bolster that with minimizing bureaucracy: expanded access to capital, simplifying the tax process, expanding and simplifying the credits process for healthcare and creating more federal business incubators to help grow small business.  Those sound great, but she doesn’t have an explanation of what it means.  How will she cut the state and local red tape using incentives?  More importantly, should she?  It does seem to step out of the bounds that federal government exists.  I am willing to give her some benefit of the doubt here though – most people wouldn’t want to sift through documents reading about how Block Grant 343235 will incentivize a state government to cut some of their licensing and code requirements.  The goal for all of this is to reduce the time and capital requirements to start a business which should increase the job supply.  By increasing the overall job supply, that will ease the burden of increasing the minimum wage because there are now more consumers with money and jobs.  Some Say’s Law in the Clinton Camp!

Clinton also wants to increase manufacturing in America through a $10Billion stimulus “Make it in America” plan.  This would be tied to local colleges to provide localized training, and tax incentives for apprenticeship programs.

Clinton Economic Plan for Worker Rights

This is quite possibly the gist of her campaign here.  Let’s just list it all out and then go from there.  Clinton supports: debt-free college, collective bargaining and unions, profit-sharing, guaranteed paid leave for families, strengthening Social Security and (it’s incredibly vague, so I’m kind of assuming here) increased mortgage subsidies.  Another sort of “want” is the end of what she calls “quarterly capitalism” – the idea that firms are constantly seeking to cut cost in an effort to keep their share prices high.  She believes the end of quarterly capitalism will lead to worker-friendly policies and a better economy.

The debt-free college is an idea that has been coming up quite frequently.  Much of Europe already enjoys this and it works quite swimmingly.  You can see that it is also supported among different economies too.  Germany is a manufacturing giant, France exports luxury items and agriculture, the Nordic countries are balanced economies between manufacturing, services, and tourism.  An important thing to note, it’s not “free” college, it’s debt-free.  Clinton plans to pay for this through tax surcharges on those making over $5Million a year.  Back to the point though. . . Right now, Millennials are putting off major life events like getting married, buying homes, having children.  This is simply because of the debt they have from their university – for an example, the average age to buy a first home is now 33 years old.  By having everyone finance education, we get a more educated populace AND continue the type of jobs that everyone like to see, that is, construction in new stuff.  Furthermore, our technology will only continue to get more advanced.  Certain jobs that we have now will continue to get phased out replaced with higher education requirement jobs.

As for unions, this is a part of her emphasis on manufacturing.  Right now, you go into a job and they have all of the power.  They have the power in negotiation, responsibility, benefit packages, and nearly everything else.  This is because they’re a billion-dollar revenue generating entity and you’re a single person.  Unions seek to even the playing field by leveraging the supply of labor into an entity that rivals the demand of labor.  Unions absolutely increase wages and rights of workers.  They also, and absolutely, reduce the profit margins of companies.  I will say that some unions have gotten out of control and have led to a huge deadweight loss in the economy.  As is the case with any interest group, they get too bogged down in their single purpose and end up costing more than they’re worth.  At that point, just like a corporation would, they should be stripped down of their excess baggage and made more efficient; however, it just never happens.  There isn’t much deliberation here – you’re either for or against unions.

The other main topic that should be talked about is her plan for profit sharing.  It’s an interesting concept that works well in some industries, and not as well in others.  Essentially, Clinton wants to increase tax incentives for profit sharing with employees.  She feels that profit sharing would lead to more employer loyalty, increased investment in workers, and happier workers.  There is also some economic literature to show that profit sharing increases the productivity and net profitability of firms.

Clinton’s Plan for Wall Street Reform

Clinton has only recently started harping on the tragedy of Wall Street.  However, it creates a large component of her platform.  One of the more, uh, robust reforms she proposes is the individual accountability of executives.  I’m not sure how she proposes doing this, because it’s a HUGE government oversight, but she wants to make a law, or impose some regulation via agency that anytime a bank loses on earnings, the corporate executives lose their compensation bonuses.  Furthermore, anytime a corporation is fined, she wants their corporate executives to also have financial penalties.  For corporate accountability that’s probably a little more doable, she wants to extend the Statute of Limitations for financial crimes, increase whistleblower incentives, and allow agencies to actually prosecute top executives for egregious wrongdoing.

For regulation on just how they do business, much of it is done through taxation (which you can read about in Part 1).  For a brief recap though, she wants to impose a “risk fee” which would be a graduated fee imposed on any bank over a certain amount.  Right now the number her website proposes is $50Billion; for comparison JP Morgan Chase has assets of $2.4Trillion.  As banks get larger and larger, they would face a higher fee.  She also has stipulations for leveraged accounts (debt-based financing).  The more leverage (debt) a bank has, the larger its risk fee.  Another tax would be imposed on high-frequency trading accounts.  Basically, imposing a fee to try and reduce the amount of algorithm traders that disadvantage the small-time investor.

Finally, the Clinton economic plan for Wall Street reform is to hone in on trying to regulate the Shadow Banking sector.  For those who may be unfamiliar with shadow banking it’s the off balance sheet (OBS) securities and money making ventures of hedge funds, banks, and other financial entities.  Because they’re OBS they stay largely unregulated.  OBS transactions are those which the financial entity has no actual claim on the asset.  Consequently, they tend to be service transactions – like finding a borrower for a lender.  They make money on the fees provided for the transaction or the interest rate arbitrage.  The reason Clinton wants to regulate them is because it’s largely a debt-based financing.  The bank servicing the transaction is using what’s called commercial paper (which is super short-term lending debt, like 30 days or less usually) and their leverage multiples are very high.  Leverage is a double-edged sword.  When you win, you win waaaay bigger than you could with just your own money.  But when you lose, you lose way big because you have the loss, plus you have to pay back the loan.  Leverage is a lot of the reason that the 2008 Financial Crisis occurred, so having such an unregulated, leveraged economy has the potential for serious systemic risk.

Clinton Economic Plan for Health

Clinton plans to expand the Affordable Care Act by allowing those 55 and up to buy into Medicare; she also proposes tax incentives for states to expand Medicaid.  Other than those two things, this is Clinton’s weak spot.  Much of her platform here comes off as somebody whining at those dastardly healthcare companies.  She wants to lower prescription costs because they’re too high, but just plans to demand companies lower the prices.  She also advocated subsidizing alternative manufacturing in America to produce the same drugs, a gross misuse of funds.  Simply coming down on FDA lobbyists and allow the import of the same drug, produced by the same manufacturer, into the country would eliminate most of the issue.  Canada still gets the same Mylan Epipen for $100.  Why should we subsidize someone just to make the same drug to see it for cheaper when it’s already being done?  Clinton also thinks that insurance companies should reduce their copays and deductibles, but again has no plan other than to demand it.

The solutions she does come up with, like I mentioned above, either require an unnecessary tax or subsidy.  It’s like she wants a universal, single-payer system, but wants to keep the lobbyists happy.  By doing so, she makes just one, terrible suggestion that flies in the face of economic theory on either side of the aisle.  Really a poor showing and more likely to do harm than good.

The only thing that I can really give credit to Clinton for is her ideas for women to get access to preventative care and contraception.  She also wants to reinforce access to safe and legal abortions.  I’m not going to get into the politics of abortion; however, it’s 2016.  Women deserve access to preventative care and maintenance of things that are exclusive to being a woman (men are already receiving care for things that are exclusive to being a man) and both sexes deserve access to free contraception.  C’mon, we’re like the only first-world country that doesn’t supply free contraception and paying $14 a year in taxes beats the heck out of the $100 a year required to supply welfare to teenage parents.  And then if we have free contraception we can at least justify not giving copious amounts of permanent welfare to parents with more kids then they can afford.

Overall though, for being the purported champion of the people, Clinton’s talk and ideas for healthcare is weak at best.

Clinton Economic Plan for Immigration

Clinton takes a markedly different approach to immigration than Trump.  She plans for a pathway to citizenship and expand the Deferred Action plans for adults and children.  She also proposes to uphold the rule of law and enforce our borders, but neglects to mention how.  Further, she wishes to expand fee waivers to reduce the overall cost of naturalization.  Finally, she wants to create a new cabinet the “Office of Immigrant Affairs” who will be tasked with increasing the integration of immigrants into the economy through English and citizenship education programs as well as “community navigators” which would be hubs to aid the naturalization process as well as provide workforce training.

This is surely to be a tough battle for Clinton.  Immigration reform is probably one of the most contested issues in the political spectrum; especially with all the news of crime stemming from the influx of refugees from the Middle East.  With cartels becoming stronger in Central and South America, Venezuelan upheaval, and Brazilian political impotence, I find it hard for anyone to convince the masses that increasing our immigration quotas would be good for the economy.

Economically, it obviously increases costs.  Undocumented workers are currently not eligible for many of our welfare programs because they don’t have a Social Security Number.  However, because they aren’t able to pass the E-Verify employment systems, many of the jobs they have leave them in poverty and, consequently, would make them financially eligible for benefits.  The issue becomes whether or not the current immigrants in America have the skills, right now, to take better jobs and thus provide more value than the cost of citizenship.  My guess is no and it’s hard to say how many generations it would take to get to that point.  That will be up to you all to decide in your own political considerations.

Conclusion

Clinton talks a great game – everyone knows that.  Her plans though seem a little too social heavy to be plausible in today’s environment.  Even her business referendums will be hard pressed to get passed because they will need money to get started.  Granted, that money is supposed to come from the huge increase in taxes on the rich, but those have to get passed first essentially without compromise.  Likely compromises I see are allowing the Buffett Rule income tax surcharges getting passed, but only if we reduce current cap and trade laws.  I could even see some of her Wall Street reform getting through if she caved on keeping current agricultural and corporate subsidies.  Ultimately, she’ll get some of what she wants, while losing some and creating a wash on revenue and thus, in total, would increase overall spending as she gets small portions of other policies through Congress.

I would have liked to see more from her healthcare views though.  Considering that’s really Trump’s strong point, economically and socially speaking, she needs to up that portion of her campaign.  Frankly, her views may be noble, but she doesn’t have solutions.  Just a bunch of criticisms without solutions.

As much as I’d like to give Clinton the nod over Trump on business, I can’t.  She faces a few contradictions just like Trump does, although in different areas.  For one, she wants to be protectionist by bolstering trade deals for America, and subsidizing American manufacturing, but at the same time she wants to increase immigration, welfare spending, and worker rights – all of which will ultimately end up in the form of more taxes on business.  I also think she suffers from wanting to do too much.  Each one of our 37 issues on her campaign have three to five points that she wants accomplished.  Any project manager will tell you that’s unrealistic.  Yet, some of her policies completely sputter and fail without the full policy implementation.  For instance, her push for minimum wage up to $12, and encouraging states to go to $15.  Without getting her small business incubators, simplifying the tax code, and reducing restrictions to opening a business, we could very well see more unemployment as small companies are unable to accommodate the large jump in labor costs.  This could be especially true if something like increased Medicaid benefits is coupled with state tax increases to cover this new cost.  So, just like Trump, I give Clinton the thumbs down on her economic platform.  Unlike Trump though, I give her an A for effort because she at least took the time to come up with a coherent and concise plan to do so on most of her views.

 

Readers, how did you like this breakdown of Clinton and Trump?  Do you agree with my thoughts on Clinton?  Be sure to let me know in the comments below.  Also, if you haven’t, be sure to like Cash Flow Celt on Facebook.  If you’re still out of the loop on Trump’s policies, here are Part 1 and Part 2!

Cash Flow Celt

I'm just a local business and finance nerd looking to help people get educated about small business, marketing, and personal finance! I write about anything and everything that I can tie into those themes. I'm also Central Florida's only Kilted Realtor, so I write about Real Estate too! Check out my About Me page to see the origins of Cash Flow Celt.

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