A Look at Hillary Clintons Economic Policies

A Look at Hillary Clintons Economic Policies

By Matthew Johnston | November 13, 2015

The middle class has been on the decline for nearly half a century, and with income inequality now at levels not seen since the 1920s, the Democratic presidential race has been largely focused on economic security for the bottom 99 percent. Democratic Presidential hopeful Hillary Clinton’s campaign is no different. Clinton's economic policies target the middle class, promising to secure their economic futures and expand their opportunities through greater access to education and more evenly distributed economic growth.

THE AMERICAN DREAM

The American dream promises that hard work will naturally lead to success. Yet with incomes no longer growing in line with productivity, it would appear that this central tenant of the American dream is fading. Clinton wants incomes to rise in line with corporate growth and productivity. Her website says that the “defining economic challenge of our time is raising incomes for hardworking Americans.”

Clinton's economic policies are aimed at confronting the challenge of raising incomes head on. Her approach is centered on three pillars: strong growth, fair growth and long-term growth. Below we briefly review these policies.

STRONG GROWTH

In order to achieve strong economic growth, Clinton believes that it is important to invest in education and infrastructure, promote small business growth and increase workforce participation, especially for women.

The New College Compact is Clinton's plan for making higher education more affordable and accessible. The plan extends tax cuts of up to $2,500 per student and significantly cuts interest rates on student loans. It also guarantees all students tuition-free community college and the ability to graduate from a four-year state school without taking loans for tuition. Clinton also proposes to invest in more scientific research. The New College Compact is not cheap. It will cost an estimated $350 billion over the next 10 years--a budget gap that Clinton plans to close by eliminating certain tax loopholes and expenditures that benefit mainly the wealthiest Americans.

Clinton's plans to improve infrastructure include the creation of a national infrastructure bank. Such a bank would use both public and private funds to invest in infrastructure projects throughout the country, improving everything from highways and bridges to broadband service.

On her website, Clinton also writes “that small businesses are the backbone of jobs and growth in America.” Part of her campaign is promising to provide small businesses with increased access to capital, greater tax relief, easier access to new markets and less red tape.

The labor force participation rate has been on the decline for a number of years now, and Clinton wants to improve the situation. One of the ways in which she wants to do that is by making the workforce more accessible to women through equal pay, paid leave and affordable child care.

FAIR GROWTH

Clinton’s emphasis on fair growth is based on the premise that corporations have been earning near-record profits while wages for average working Americans have stagnated. To achieve greater shared prosperity, she aims to encourage profit sharing, boost the minimum wages, ensure the rich pay a fair share in taxes and expand early learning opportunities for young children.

To encourage companies to share profits with their workers, Clinton has proposed a plan to implement a 15% tax credit - even higher for small businesses - for businesses that distribute profits to employees. The tax credit would be targeted at those workers and businesses that need it the most. Clinton expects the plan to cost close to $20 billion over ten years and she plans to pay for the credit through closing tax loopholes.

Concerning the federal minimum wage, Clinton is supporting that it should be lifted to $12 an hour. But, through state and local government efforts, and stronger collective bargaining for workers, she hopes to boost wages even higher.

To ensure that the wealthy pay their fair share in taxes, Clinton plans to do away with the carried interest tax break and other tax loopholes and expenditures that serve to benefit the rich.

Believing that early development is crucial for later success, Clinton also plans to expand early learning through a proposal that would give every 4-year old in America access to high-quality preschool education. Making this education available to all children would help to ensure that they all have equal opportunities for success.

LONG-TERM GROWTH

Finally, Clinton wants to emphasize long-term economic growth. To achieve this, she aims to encourage companies to plan for long-run growth instead of short-run gain. She also plans to increase regulation on Wall Street that would deter risky speculation that might have long-term destabilizing effects on the economy

To encourage businesses to invest for the long-term, she proposes to reform the capital gains tax in a way that would give greater rewards to investments aimed at creating jobs and future growth. She will also work to discourage the influence of shareholders that are too focused on short-term profits, as well as reforming executive compensation so that it is more aligned with the achievement of long-term growth.

One of her major focuses in this regard will be to impose strict accountability on Wall Street. She will defend the Dodd-Frank Wall Street Reform and Consumer Protection Act, but will also work to remove the dangerous risks posed by the financial sector by giving more power to independent regulators and ensuring that criminal activity is dealt with appropriately.

EFFECTS ON THE ECONOMY

Clinton has made some ambitious proposals for the economy that will come with costly price tags, but if she can achieve the strong, long-term growth that she hopes for, these proposals may end up paying for themselves with benefits to all classes of Americans, including the wealthy.

In an economy that appears to be struggling from a lack of aggregate demand, plans to increase infrastructure investment, help small business growth, and put more money into the pockets of middle-class Americans make a lot of sense.

Putting more money into the pockets of middle-class Americans will increase their purchasing power, which will raise aggregate demand. Business confidence will rise and future investment will be seen to be profitable once again. Thus, helping to increase incomes for the middle class doesn't just benefit just them, but all Americans, including the wealthy.

Discouraging risky financial speculation will also help to direct funding to more long-term investments that will help to create more jobs. In fact, it may be that the economy is so broken that it is encouraging those with more money than they know what to do with to engage in financial speculation that differs little from gambling.

With purchasing power returned to the middle class, cracking down on risky financial speculation will build the right incentives for real productive business investment to become not just profitable, but sustainable.

THE BOTTOM LINE

Clinton’s emphasis on strong, fair, and long-term growth is aimed at increasing the incomes of hard-working, middle-class Americans. At a time when the economy has been struggling and income inequality is on the rise, Clinton’s campaign could promise a brighter economic future.

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