The analytics arm of Moody’s credit rating agency has now examined both major party candidates’ economic policy statements and says they will lead in two opposite directions.
Whereas the new report says that Hillary Clinton would create a “somewhat stronger U.S. economy,” last month’s review of Donald Trump’s proposals declared America would “suffer meaningfully” as the economy becomes “more isolated and diminished” by his presidency.
Clinton would raise taxes on the highest incomes, leaving middle and working class families unaffected while raising their overall benefits. Of course, Moody’s analysis is doctrinaire Wall Street, so their report calls this a disincentive to ‘saving, investing, and earning’ and counts it against her.
The Trump Campaign hotly disputed author Mark Zandi’s earlier report, which found that full implementation after his election would dampen the economy, destroying more than three million jobs and reducing federal revenues by as much as $10 trillion. Via the Wall Street Journal:
The report singles out trade and immigration policies as the most detrimental to the economy in the short run because they could sharply boost labor and goods prices at a time when there’s less slack in the labor market. “It is a massive supply shock to the economy that’s very pernicious, and the Fed doesn’t know how to respond to that,” said Mr. Zandi.
Moody’s concludes that those price pressures would force the central bank to raise interest rates at a faster-than-desired pace, contributing to a recession in 2018 that could produce a 25% drop in the S&P 500.
[…] Separate projections made earlier this year by Peter Petri of Brandeis University found that Mr. Trump’s proposed tariffs would widen the U.S. trade deficit for goods by around $275 billion, or an 37% increase above last year’s level.
A broad consensus has emerged among economists that ‘President Trump’ would be a disaster for the United States and the entire world. The Economist magazine added Trump to its list of top ten threats to the global economy in March. His enthusiasm for Brexit, disdain for the European project, trade bluster towards China, and open admiration for Russian strongman Vladimir Putin have alarmed advocates of free trade and capitalism.
To be sure, ‘free trade and capitalism’ aren’t as popular as they once were in America. But when Sen. Bernie Sanders attacks Hillary Clinton’s Wall Street ties, it is a critique of economic dogma that serves the interests of the investor class; Trump’s attacks on Wall Street are merely a complaint against his own credit rating.
Multiple bankruptcies have left the reality show star radioactive in the eyes of major American banks, spurring Trump to seek financing from less-reputable overseas sources — such as foreign dictators and oligarchs who oppose US policy and envy America’s command of the global economy.
In Moody’s new analysis, the most likely outcome is that President Clinton does not get most of her agenda through Congress, and therefore has little overall effect on the economy. But in the best-case scenario, her progressive platform would be a significant boost for American families and the broader economy.
Among other things, this would mean that the government will get an extra $150 billion in revenue as a result of higher taxes levied on the wealthiest bracket of tax payers; that infrastructure spending will get a five-year, $300 billion infusion that will be used for the construction of roads, bridges, airports and more; and that Clinton is successful in expanding paid family leave.
The projected results of these policies? Real GDP could grow an average of 2.7% per year from 2016 to 2020; the economy could produce 10.4 million jobs and the unemployment rate could dip as low as 3.7% by 2018. Moody’s also said that paid family leave should have the effect of increasing the labor force participation, “since it is estimated that no more than 40% of workers currently have private paid leave coverage, generally for the birth of a child.”
Moody’s chief economist Mark Zandi is a registered Democrat who advised and donated to the John McCain campaign in 2008. His method is structurally similar to the way the Congressional Budget Office scores economic legislation.
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