With Douglas Harbrecht, Director of Digital Media at Kiplinger Washington Editors
Both Donald Trump and Hillary Clinton are promising to grow the economy and increase jobs in our country. Their plans are different but both will affect your personal finances, so it’s vital to understand at least the basic tenets of each candidate’s proposal. So we’re bringing you Clinton vs Trump, the economic plan edition.
Doug Harbrecht, Director of Digital Media at Kiplinger Washington Editors, has been covering politics for 30 years and says he’s never before seen economic growth in jobs framed quite this way.
From the start, Trump has campaigned for renegotiating or nullifying every trade deal since NAFTA. His is a protectionist approach very is is a protectionist apporachHissimilar to the BREXIT code which is pulling the United Kingdom out of the European Union and a radical departure from the long-standing GOP platform of pro-globalization and pro-trade from the last 100 years.
For her part, Clinton follows a more traditional Democratic stance calling for free-trade and “tax and economic incentives to entice multinationals to bring their dollars back to the US.”
They have opposing ideas of how to deal with American corporations who merge with foreign corporations and then pay a lower tax rate because they are domiciled in a foreign country. Trump would lower American corporate taxes to 15% to de-incentivize them from doing these inversions. Clinton, on the other hand, has said she would impose penalties on those companies who take these foreign tax advantages.
Concerning the Affordable Care Act, Trump and Clinton are also diametrically opposed. Clinton would expand on it, says Doug, “by seeking to lower out of pocket and prescription drug costs. To make premiums more affordable, she backs a tax credit of $5000 per family to cover costs exceeding 5% of household income.” For Trump’s part, he’s been widely quoted as saying he would repeal the whole thing and allow private plans to work across state lines.
As for Social Security and Medicare which will concern all of us sooner or later, Hillary Clinton has proposed expanding those benefits for women who are widows and caregivers and would let some individuals over the age of 50 or 55 to buy into Medicare instead of at the present age of 62. To pay for all this, she wants to close loopholes for the wealthy and for corporations.
Donald Trump has said he would preserve both Social Security and Medicare but has hinted at entitlement cuts to keep both programs solvent.
The Tax Policy Institute has analyzed both candidate’s overall economic proposals to predict the future cost and effect on the deficit. By costing out Clinton’s proposals, they say that over ten years these tax increases could raise about 1.1 trillion dollars and, assuming the spending to be around 1 trillion dollars, it could result in a neutral position for the deficit, which is a good thing.
Trump has been less specific with many of his proposals and actually changed it from the beginning of his campaign in his speech to the Detroit Economic Club on August 8th, so the calculations haven’t yet been determined. “That said, though,” explained Doug, “the Tax Policy Center did look at his original tax cut plan and estimated that it would cost 9.5 trillion dollars over the next 10 years.” But there is an assumption that he will have to make additional spending cuts so that the red ink won’t increase the public debt.
For a more detailed and comprehensive comparison between Clinton and Trump and what each candidate’s platform means to you and your finances, we invite you to attend an in-person talk with Steve Pomeranz on September 22nd at 7pm at the Marriott Hotel in Boca Raton.
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Steve Pomeranz: The effect of the candidate’s proposals on your money. Doug Harbrecht joins me from Kiplinger.com. Welcome back to the show, Doug.
Doug Harbrecht Hi, Steve, pleased to be with you.
Steve Pomeranz: Let’s talk about some of the other areas that we haven’t addressed on the show quite yet. Let’s talk about economic growth and jobs because, really, our focus here is how this is going to affect people’s finances and their money and their investing, and, obviously, if there’s going to be money spent on economic growth that may have an impact. Tell me what the key differences are between Clinton and Trump.
Doug Harbrecht: This is one of the more interesting areas, too because, heck, I’ve been covering politics for 30 years and I’ve never seen the economic growth in jobs framed quite this way. Trump wants to pull back from worldwide economic engagement in pursuit of much tougher trade deals creating more jobs at home. He basically wants to rip up every trade deal since NAFTA, renegotiate new deals. His approach is actually very confrontational. He wants to declare China a currency manipulator. He wants to build a wall across Mexico. Long and short of it is his approach is very similar in many ways to the Brexit code pulling the United Kingdom out of the European Union. It is a bold move. It’s very protectionist and we haven’t seen anything like this in 100 years.
Steve Pomeranz It is a radical departure from the GOP platform for about the last 100 years. They always been pro-globalization, pro-trade, and all of this, and had been fighting the Democrats on that, and he’s basically turning the tide completely.
Doug Harbrecht: Usually, there’s a free trader in a presidential race, usually the Republican is the free trader. There’s no free traders in this race. There’s a protectionist and there’s a fair trader with Hillary Clinton, and that’s sort of a more standard Democratic line.
Steve Pomeranz: We’ll go quickly through the Clinton platform on that.
Doug Harbrecht: Sure. She wants more of a carrot approach rather than wielding a club. She’d create tax and economic incentives to entice multinationals to bring their dollars back to the US, but she wouldn’t force them though the way that Donald Trump talks. She supports … we haven’t even talked of immigration, but she creates a pathway to citizenship to undocumented immigrants living in the United States…and she supports the H1 B program. This is a program that allows skilled foreign workers to come to the United States to fill jobs that can’t be filled otherwise. She says the trade’s been a net plus for our economy, yet she opposes President Obama’s Trans-Pacific Trade Agreement. A lot of people think that once the election is over she’s probably going to make some changes to that and probably support it.
Steve Pomeranz: Well, she was part of the process to get it going.
Doug Harbrecht: Exactly.
Steve Pomeranz: It’s hard to separate reality from rhetoric here. You mentioned the term carrot and the stick because there’s another area where I think the candidates are reversing roles on the carrot and the stick. You say that Trump’s got the stick here with regards to trading with our partners and Clinton’s got the carrot, but in the case of these corporate inversions, which are American corporations who are paying a high tax rate merging with foreign corporations that pay a low tax rate and then saving all this money because now they don’t have to pay such a high tax rate because they’re domiciled in a foreign country. Well, basically, in my view it seems to me that Trump is saying, “Hey, we’re going to lower American taxes to 15% to de-incentivize corporations from having to do these inversions” Whereas Clinton is going, “Hey, we’re going to penalize them if they do it. What do you think about that?
Doug Harbrecht: You’re exactly right and, again, that’s kind of an interesting reversal. Look, Hillary Clinton is going after the rich on a number of fronts here. She’s saying, “I’m going to close down a whole bunch of loopholes for rich people to benefit. Donald Trump is supporting of supply side economics in many ways with the idea, the theory, that if you cut taxes on rich people who tend to be creators of businesses or entrepreneurs who have created more jobs that the tide will lift all boats, so we’ll see.
Steve Pomeranz: The trickle-down philosophy has been around for a long time, and I think most of the beef for those people who are really just not earning, not seeing their wages rise, is that it doesn’t seem to be trickling down all that much. To them, at the very least. Let’s move to health care.
Doug Harbrecht: Sure.
Steve Pomeranz: There are some key differences between the two of them with regards to the Affordable Care Act, that’s for certain. Takes us through that.
Doug Harbrecht: Sure, Clinton supports Obamacare, The Affordable Healthcare Act and she wants to expand on it. Trump wants to repeal it. He just wants to repeal Obamacare and has suggested letting private plans operate across state lines. They’re not allowed to do that now. These are two diametrically different approaches.
Steve Pomeranz: What about fees to pay for all of this? Are there any differences with what Clinton wants to do with regarding to changing the cost of Obamacare?
Doug Harbrecht: Her platform, she built on the [inaudible 00:05:13] by seeking to lower out of pocket and prescription drug costs. To make premiums more affordable, she backs a tax credit of $5000 per family to cover costs exceeding 5% of household income.
Steve Pomeranz Yeah, it’s interesting that there’s always this talk about capping this and doing that, but these costs have got to be born somewhere. They just don’t go away. It’s like whack-a-mole right? The taxpayer is going to pay less, but it’s going to show up somewhere else. I just don’t really know where any of these kinds of proposals can end up. Let’s move on to Social Security and Medicare. Are either of the candidates talking about touching that?
Doug Harbrecht: Well, yeah. Clinton has a major plank in her policy proposals which would expand social security benefits for women who are widows and caregivers and also on the Medicare front, she would let individuals over the age of 50 or 55, they could buy into Medicare just like you do when you enter/enroll. Medicare is when you’re 62 years old.
Steve Pomeranz Yeah. How are they going to be paid for? These extra services afforded to women and so on?
Doug Harbrecht: Crack down on rich people, crack down on corporations. This is, again, closing corporate loopholes. She’s big on that in order to try to pay for all of this stuff. Pretty interesting sidelines for this the Tax Policy Institute, an independent tax policy center, has costed out Hillary’s proposals. Over 10 years they say that this will raise about 1.1 Trillion dollars but a lot of this is being subsumed by her new policy proposal so we don’t really know quite sure how much.
Steve Pomeranz Let’s stop there before you go onto Trump. An independent tax policy institute, or an independent agency, or non-profit has said that Clinton will raise 1.1 trillion from this increase in taxes?
Doug Harbrecht: Right.
Steve Pomeranz: And that we don’t really know what the spending is going to be, but I think a good assumption is that the spending is going to be around 1 trillion dollars, so it may be neutral regarding the deficit and that’s a good thing. What about Trump’s plan?
Doug Harbrecht: Trump says he wants to preserve Social Security. He’s pledged to preserve both Social Security and Medicare. He’s done this throughout his campaign but in recent weeks his advisors have hinted that it may take entitlement cuts to keep both programs solvent in the future. There are no details. That’s one of the issues with Donald Trump’s policy proposals, they tend not to be as detailed and sketched out as Hillary’s.
Steve Pomeranz: Yeah, I’ve noticed that. What is the Tax Policy Institute saying about the future cost or effect on the deficit if Trump’s plans get pushed through?
Doug Harbrecht: Well, I don’t think they’ve been that specific. He just wants to keep the Social Security solvent and here’s the gist of it: By 2019, interest rates won’t be enough to close the funding gap and without further reforms, payments will have to be cut by 21% in 2034. Now nobody expects that to happen. Everyone expects for the President and the Congress to come up with some solution before then that either increases the official retirement age or would involve some cutbacks either in cost of living adjustments so that they are less generous or some cuts somewhere along the way. Trump has said that he would look at these things, but he hasn’t been specific yet so it’s hard to put any kind of cost on them yet.
Steve Pomeranz: Right. For those of us who like spreadsheets and who like to put one number next to the other, Trump’s not really helping us out very much here. There’s not a lot of detail. Really, my question before wasn’t about Social Security, and I apologize for that, it was more about the extent of his total, overall plans. I believe that there is an expectation of the significant rise in the deficit because he’s significantly cutting taxes.
Doug Harbrecht: Sure, and with his significant tax cut, again he’s making it difficult for us spreadsheet lovers because he had a plan which he came into the campaign with, he was talking about during the primaries. He changed his plan in his speech to the Detroit Economic Club on August 8th. His new plan hasn’t been costed out yet. That said, though, the Tax Policy Center did look at his original tax cut plan and they estimated that it would cost 9.5 trillion dollars over the next 10 years. Now there is an assumption in there that he will have to make additional spending cuts or that he will have to do other stringent measures so that kind of red ink won’t increase the public debt.
Steve Pomeranz: I think the hope is there that this type of policy will increase jobs so much that it will raise the tax base. Kind of the original Reagan idea which actually seemed to work in the 80’s.
Doug Harbrecht: Yeah.
Steve Pomeranz: Doug Harbrecht with Kiplinger.com who has been with me to discuss what you’ve just heard, the comparison between Clinton and Trump. And don’t forget that I will be holding an in-person talk on this particular subject and discuss all of this and what it means to you and your finances September 22nd at the Marriott Hotel in Boca Raton. Doug, thank you so much for joining us.
Doug Harbrecht: Steve, thank you.