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The outcome of the presidential election is the biggest risk faced by the American economy, according to more than 60 percent of respondents in a recent Bankrate.com survey — well above the number who named other threats, like terrorism or a slumping stock market.
Voters know the economy today matters — and as the first presidential debate beckons, the differences between Hillary Clinton and Donald Trump when it comes to economic policy matters could hardly be greater.
“Americans do feel that there’s a lot at stake when you look at the wide differences between the two candidates,” said Mark Hamrick, senior economic analyst at Bankrate. “I think it’s easy to understand why Americans think there’s a substantial difference between the two,” he said.
Determining exactly how a Clinton or a Trump presidency would impact the economy is an inexact science. There are a lot of unknowns, including which party will control the Senate (most poll-watchers tend to agree that the House is likely to stay in GOP hands).
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“The ability of either of them to get much enacted is an open question,” Hamrick said. “We can’t even get the bare minimum approved by Congress,” he said, alluding to the partisan gridlock on Capitol Hill. “I’d be very cautious about staking large bets, so to speak, until we know how Congress is populated.”
“Hillary Clinton’s proposals are very similar to the ones we’ve seen in the Obama administration,” said Len Burman, Robert C. Pozen director of the Urban-Brookings Tax Policy Center. “She would do things that raise concerns for economists,” he said, like increasing taxes on top earners.
According to a Wells Fargo analysis, these spending plans could be mitigated if Clinton wins the White House. Although it ranks the prospect of a Republican Congress and Clinton presidency as the least likely outcome, with only a 10 percent chance of happening, it deems this combination to have a “slightly positive” outlook, the best of four scenarios studied.
The most likely scenario, with a 40 percent probability, is for a Clinton presidency and the Democrats retaking the Senate while the Republicans retain the House, according to Wells Fargo, which deemed this combination economically neutral. It found the most negative — also a more unlikely outcome, at 20 percent probability — outcome would be for a Trump presidency and for the GOP to control both houses of Congress.
The best political balance for the economy has come when a Democrat has held the White House and the Republicans have controlled Congress, shows one survey.
“We don’t think Republicans in the House will go for big budget deficits, no matter who wins,” said Paul Christopher, head global market strategist at the Wells Fargo Investment Institute.
When WalletHub.com took a look at how different sectors of the economy have historically performed under Democratic and Republican presidents, it determined that the best political balance for the economy has come when a Democrat has held the White House and the Republicans have controlled Congress. WalletHub found that GDP and job growth fare better when both the presidency and Congress are in Democratic hands, while trade and the price of gas benefit from a Republican in the White House.
In some areas, particularly trade, though, history might not be a guide. “Basically, he’s not really proposing a Republican agenda on trade,” Burman said of Trump. “A lot of economists are concerned he would start a trade war with the rest of the world.”
Clinton has flip-flopped on her support of the Trans-Pacific Partnership, while Trump has been steadfast in his opposition, calling it a “catastrophe” and threatening to “terminate” deals like the TPP as well as NAFTA, while implementing tariffs on Chinese imports, to boot.
“Mr. Trump’s positions, as he’s stated them, are clearly more negative for the economy,” Christopher said, adding that Trump’s ideas could set the U.S. back half a century in terms of the progress made on free trade. “It’s quite conceivable that we could unleash something that’s quite a bit more negative for our export markets,” he said.
Trump promised to add 25 million new jobs by cutting corporate taxes and regulations, but experts say this would be stymied by the stance that attracted the attention of voters initially: A pledge to deport and keep out roughly 11 million undocumented immigrants. A CNBC analysis found that many of those jobs, if they were created, would go begging because there weren’t enough workers to fill them.
Center-right think tank the American Action Forum crunched the numbers and determined that taking so many workers out of the labor pool would take a $1.6 trillion bite out of the nation’s GDP. Many experts have said the logistics of executing mass deportations would be nearly impossible, and certainly very expensive, with enforcement alone costing, by the American Action Forum’s estimate, $315 billion.
Trump’s other signature immigration platform plank, the promise to ban Muslims from entering the U.S., would also be extremely challenging to implement, and an attempt to do so would mean another steep bill for taxpayers. Experts say the initiative could easily double, or more, the current $21.5 billion the U.S. spends running its immigration system.
Overall, economists say, the impact of voters’ choice come November has the potential to be significant — and not necessarily in a good way.
“I think there’s a good reason why there aren’t many prominent economists lining up behind the Trump campaign,” Burman said. “His policies, collectively, could be extremely damaging to our economy.”