Hillary Clinton’s economic agenda risks another recession

Source: Washington Times

One of the dumbest statements in modern times was Speaker of the House Nancy Pelosi’s declaration that “the best way to stimulate the economy” is through food stamps and unemployment insurance.

This economic mumbo jumbo defies basic common sense and helps explain why we still have more than 40 million Americans on food stamps — evidently, the more that get free food, the more prosperous we become. This is the crux of the continuing curse of Keynesian economics, which says that the more the government spends, the more the economy grows. A dollar of government spending leads to as much as two dollars of additional economic output, according to Professor Pelosi.

Hillary Clinton is apparently one of Mrs. Pelosi’s A students. The entire Clinton recovery agenda is to spend $1 trillion more on government public works programs, free day care and college education, and expanded entitlements. She would raise investment and personal income tax rates (paid by many small businesses) to finance all of this.

Hillary has been parading around a study by economist Mark Zandi of Moodys, which claims that this fairy dust will mean happy days are here again. He claims millions of new jobs and billions in added output. But Mr. Zandi has been one of the wrongest economists in America for the past decade. It was Mr. Zandi who claimed massive job gains and GDP growth from the Obama stimulus plan with food stamps and other giveaways.

Oops. Instead we got what The Wall Street Journal recently disparaged as “the weakest recovery since the 1940s” with stagnant wages.

Meanwhile the Donald Trump economic plan is based on the idea that easing the burden of taxes and regulations on businesses and workers will kick start faster growth and bring high-paying manufacturing jobs back to America. (We are still one million manufacturing jobs shy of where we were in 2007).

Two new studies released in recent days verify that Mr. Trump’s tax plan will create millions more jobs and raise wages for American workers, while the Hillary Clinton tax and spend plan would shrink output and possibly throw the U.S. economy into another painful recession.

A just-released study prepared by the respected Beacon Hill Institute for the Dallas-based National Center for Policy Analysis finds that Hillary’s tax plan “would fund tens of thousands of government jobs at the cost of five times as many private sector jobs, while lowering personal income, GDP and business investment.” Business investment is already a major weak spot of the economy.

The study finds that the Clinton tax hikes would crush new investment and shrink GDP.

According to David Tuerck, the senior economist at Beacon Hill, “in the first year, real GDP would be more than half a percent less than under the Congressional Budget Office’s current baseline estimate, and almost 1 percent less in 2026.”

Given that the economy has only been growing at 1.2 percent over the past nine months, the Hillary tax and spend plan could plunge the U.S. economy into another deep recession if her tax hikes take effect. Over time the taxes and debt to pay for the government spending would mean five private sector jobs lost for every government job created. “What we have here is a plan to destroy hundreds of thousands of private sector jobs just to pad government payrolls,” Mr. Tuerck concludes, “while, in the process, doing almost nothing to improve tax fairness.”

Then there is economist Larry Kotlikoff of Boston University, who has modeled the impact of the Trump plan to cut the U.S. business tax rate to 15 percent from as high as 35 percent today.

According to Mr. Kotlikoff, by reducing this tax rate on domestic production of goods and services, by 2020 the U.S. economy would be $1.34 trillion larger than otherwise. Wages would rise by 6 to 7 percent above the baseline. See chart.

I have known Professor Kotlikoff for years. He is a life long Democrat and tells me he is not even a Trump supporter. But he says Mr. Trump’s plan is far superior to Mrs. Clinton‘s. “Moving from our 35 percent corporate tax rate to Trump’s proposed 15 percent rate would,” he concludes, “produce a huge increase in capital, much of it coming from abroad.”

Who benefits the most from the Trump tax cut? Mr. Kotlikoff concludes: “This kind of reform has the potential to raise the income of the typical worker by as much as $4,000 per year within the next four years.”

That’s at least $4,000 more added income than middle class workers got after eight years of Obama policies.

Hillary Clinton’s campaign theme is that Donald Trump is “too risky” to put in the White House. But the biggest risk to America’s financially-stressed middle class is another gut-wrenching recession. It’s fairly simple. If these new studies are right, Hillary’s tax and spend economic plan may well lead us over that cliff.

Original Article