WASHINGTON, June 22, 2016 — Crooked Hillary Clinton, as Donald Trump has called her, gave a major economic policy speech Tuesday. The overall message: she essentially wants to continue and expand the delusional economic policies of President Obama, who will be the first president in recorded economic history to serve an eight-year term without at least one year in which economic growth exceeded 3 percent. His best year was 2.5 percent growth in 2010.
President Obama never made economic growth a top priority. Instead, his main goal was to cure perceived social injustices by raising taxes on the highest income earners and then transferring that money to people who didn’t earn it in the form of social programs like free or subsidized health care.
Even though the White House forecast that economic growth would average about 4 percent between 2011 and 2014, the actual growth figure was about 2 percent. This, coupled with the substantial increase in part-time workers as a result of the 30-hour work-week limit defined in the Affordable Care Act, has resulted in worsening income inequality, worsening poverty rates and a decline in the standard of living for the middle class.
President Obama touts the number of jobs he has created and how job growth on his watch has been positive for almost six years. He proclaims how much better the economy is today than when he entered office and concludes his policies are working. President Obama is delusional. And, based on Clinton’s plan for the economy, she will be delusional too if elected president.
Virtually every economist will agree that economic growth is desperately needed in this country and that a high rate of growth will solve every economic problem. Growth will increase demand for workers, which both raises wages and provides more jobs. Fewer people would need social programs, and tax revenues would increase to help reduce the massive Federal deficit.
Growth encourages innovation, enabling new products to be developed while others would be manufactured more competitively, improving our trade position worldwide. Because of increased opportunity, lower income earners would see an increase in income so they could pay their own bills instead of feeling dependent on the federal government. Income inequality would be reduced.
Clinton says that the way to grow the economy is to increase wages, which results in more demand, which leads to increases in output, which leads to even more people being hired. Her logic is correct, but her starting point is in question. She suggests a policy that may be politically popular so that she can continue the Obama delusion.
Clinton would raise the minimum wage, perhaps to $15 per hour. That fits her narrative of rising wages to stimulate growth. But in reality, that view is as delusional as Obama’s.
Suppose raising the minimum wage results in a worker’s pay increasing by $1,000. That worker would, at a minimum, pay about 6 percent ($60) in social security taxes, leaving her $940 to spend. Meanwhile, the worker’s employer pays the $1,000 plus 6 percent Social Security tax, meaning the employer pays a total of $1,060 for this worker.
Where does that money come from?
The employer could just pay the cost and reduce his profit. But that won’t work in the long term since the business needs adequate profit margins to exist. Rather, the business would raise prices to offset the $1,060 in added cost. The result is that low-income workers have $940 to spend while other consumers have $1,060 less to spend. The net effect is negative, not positive, which slows growth. When federal income taxes are considered in the equation, the negative effects worsen.
Hillary Clinton is living in another universe if she believes that raising the minimum wage encourages economic growth.
Clinton spent much of her Tuesday speech slamming presumptive opponent Donald Trump. She said that his policies would be reckless and dangerous for the economy, claiming economists agree. “Trump would throw us into recession, where the U.S. would lose 3.5 million jobs, incomes would stagnate and the national debt would explode,” she proclaimed, continuing on her delusionary arc.
Although Trump may be lacking in some economic platform specifics, he would lower tax rates, reverse the crippling regulations imposed by the Obama administration, reduce government spending, encourage people to get off the welfare and food stamp rolls and support free trade on a fair basis. This is exactly what Ronald Reagan did in 1981 and what President Bill Clinton did in 1996. In both cases, economic growth averaged about 4.5 percent for a four-year period. In 1984, economic growth under Reagan exceeded 7 percent.
Hillary Clinton’s economic policies are an extension of the policies that have not worked for the past eight years. A continuation of tax and spend, redistribution of income, heavy regulation of economic activity and policies that regard economic growth as a low priority would simply continue the great Obama economic delusion.
Americans need something new and better in 2017 and beyond.
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