Author: o.oyewo

While the economy might not be the first thing on people’s mind this campaign period as illustrated by this Pew Research Center survey which shows that the issue voters want to hear about most in the presidential debate is “keeping the US safe from terrorism.” The state of the economy is still a crucial issue and is likely to play a significant role in the upcoming elections.

According to a survey on the views of the economy, carried out by the Pew Research Center in July, sampling 2,245 adults, 18 years of age or older, living in all 50 U.S. states and the District of Columbia. “The public continues to have mixed ratings of the nation’s economy. Currently, 44% say conditions are only fair while a roughly equal share views them as excellent or good (27%) or poor (28%).”

According to this survey “Most Americans (53%) say their family’s income is falling behind the cost of living. About a third (36%) say they are staying about even while just 8% say their incomes are rising fast than the cost of living.”

Interestingly there is a difference in the views of the economy amongst registered voters depending on which presidential candidate they support with “a majority of Trump supporters (61%) saying their incomes are not keeping pace with the cost of living compared with 47% of Clinton supporters.”

As with views of the economy, the public’s perceptions of job availability are almost the same, with “nearly half of the public (49%) saying jobs are difficult to find in their community, while slightly fewer (43%) say there are plenty of jobs available.”

An important question is, are people’s views of the economy congruent with the state of the economy and where should attention be focused, on the numbers or people’s perceptions?

Below is a summary of an interesting article titled “How not to improve GDP” by Jennifer Rubin of the Washington Post. This article compares the economic policy proposals of the two presidential candidates .

Ms. Rubin expresses a rather pessimistic view of the candidate’s economic proposals, stating that the policies proposed by the presidential candidates to address economic recovery efforts “are distressingly inadequate, counterproductive or politically impossible”.

Ms. Rubin backs her argument by stating “ Donald Trump wants tax cuts that would give a windfall to the rich and increase the debt by at least $10 trillion over 10 years. He wants less regulation (not a bad idea in principle), wants to shrink the labor force and consumer markets by 11 million to 12 million people by rounding up and expelling illegal immigrants (an awful idea in principle and in particulars) and want to engage in trade war with China (an awful idea and surefire way to help send us skidding into a recession).”

She continues to say “a lot of what she (Clinton) is proposing- tax hikes, hiking the minimum wage, free college etc is either not going to do much for job growth, isn’t paid for or both.”

She backs this up by quoting a Yahoo Finance article titled Clinton’s economic plan trumps, well, Trump’s which states

“[Clinton’s] proposals would “do little to directly promote increased private sector investment,” Moody’s says, relying instead on government spending as the primary stimulus. And by promoting so many small ideas instead of a few overarching ones—such as corporate tax reform or a new value-added tax—Clinton is essentially promising even more government bureaucracy to implement and enforce yet more complexity in the sprawling federal regulatory regime.”

This article concludes by stating, “ In other words, if we do pretty much the opposite of what the two candidates want to do, we’ll be fine. The tragic part is that we have the capacity to be growing at much higher levels. Our Politicians, however, are playing dumb- or really don’t understand how to promote economic growth”

This is a scary when you think about it, do the presidential candidates have what it takes to steer the economic recovery efforts in the right direction?

Secretary Clinton’s proposed economic policies can be found at https://www.hillaryclinton.com/issue.

Moody’s Analytics predicts that “Secretary Clinton’s economic proposals will result in a somewhat stronger U.S. econ­omy. Near-term growth is supported by the stimulus provided by her spending plans in combination with much stronger foreign im­migration. Increased government spending, particularly more infrastructure investment financed primarily by higher taxes on the well-to-do, acts as an economic stimulant.

Greater government spending adds directly to GDP and jobs, while the higher tax burden has an indirect impact through the spending and saving behavior of high-income house­holds. This mitigates the near-term negative impact on GDP and jobs since these house­holds will not reduce their spending one-for-one in response to their higher tax bills and will use their savings and other financial resources. The higher minimum wage also crimps employment.

Longer-term growth under Secretary Clinton’s policies is somewhat stronger be­cause on net they expand the supply side of the economy—the quantity and quality of labor and capital needed to produce goods and services. Most significantly, immigra­tion reform, would greatly increase the size of the workforce and support stronger productivity. Her plan to increase spending on the nation’s infrastructure will also boost business competitiveness and productivity. Her paid family leave plan would lift labor force participation, while increased spending on college education and early childhood education would raise the educational at­tainment of workers.”

An analysis of Donald Trumps economic proposals by Moody’s Analytics predicts that “the U.S economy will become significantly weaker if Donald Trump’s economic policies were implemented.”

More information on Donald Trump’s economic vision can be found at https://www.donaldjtrump.com/positions/economic-vision.

This report reveals, “Mr. Trump’s economic proposals will result in a more isolated U.S. economy because cross-border trade and immigration will be significantly diminished. With less trade and immigration, foreign direct investment will also be reduced which will diminish the nation’s growth prospects.

Trump’s economic proposals will also result in larger federal government deficits and a heavier debt load because his personal and corporate tax cuts are massive and his proposals to expand spending on veterans and the military are significant.

Given his stated opposition to changing entitlement programs such as Social Security and Medicare, this mix of much lower tax revenues and few cuts in spending can only be financed by substantially more government borrowing.

Driven largely by these factors, the economy will be significantly weaker if Mr. Trump’s economic proposals are adopted.

Under the scenario in which all his stated policies become law in the manner proposed, the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office.

By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%, compared with below 5% today. During Mr. Trump’s presidency, the average American household’s after-inflation income will stagnate, and stock prices and real house values will decline.

Under the scenarios in which Congress significantly waters down his policy proposals, the economy will not suffer as much, but would still be diminished compared with what it would have been with no change in economic policies.

Those who would benefit most from Trump’s economic proposals are high- income households. Everyone receives a tax cut under his proposals, but the bulk of the cuts would go to those at the very top of the income distribution, and the job losses resulting from his other policies would likely hit lower- and middle-income households the hardest.

Even allowing for
 some variability in 
the accuracy of the
 economic modeling and underlying 
assumptions that
 drive the analysis, four basic conclusions regarding the 
impact of Mr. Trump’s 
economic proposals
 can be reached:

1)
 They will result in a 
less global U.S. economy; 2) They will lead to larger government deficits and more debt; 3) They will largely benefit very high-income households; and 4) They will result in a weaker U.S. economy, with fewer jobs and higher unemployment.”

Moody Analytics- www.economy.com

FocusEconomics- www.focus-economics.com

Bureau of economic analysis, Department of Commerce- www.bea.gov

Bureau of labor statistics- www.bls.gov

Yahoo Finance/Yahoo News- finance.yahoo.com/www.yahoo.com

Bloomberg Markets- www.bloomberg.com

Wall Street Journal- www.wsj.org

The Hill-www.thehill.com

National Public Radio- www.npr.org

A major theme in Donald J. trump’s immigration reform policy is his proposal to remove 11.3 million undocumented immigrants living in the U.S.

A report by Moody’s Analytics predicts that “the economy will suffer as Mr. Trump’s deportation policy acts like a negative supply shock, requiring millions of undocumented immigrants to leave the country and resulting in a reduction in the size of the labor force.

The deportation of 11.3 million undocumented immigrants will also have significant negative demand side impact on the economy as the purchasing power of these immigrants also 
leaves the country.

As undocumented immigrants leave the country; the labor market will tighten with the contracting labor force. Labor costs will skyrocket as employers struggle to fill the open job positions.

Recent research has shown that native U.S. workers are imperfect substitutes for immigrants due to different occupation choices and skills. For example, where undocumented immigrants work as manual laborers in agriculture, it is unlikely that many natives are interested in performing these labor-intensive jobs even at modestly higher wages. It is even the case that farms that struggle due to labor shortages may prompt native job losses in upstream and downstream industries.

Mr. Trump’s immigration policies will thus result in fewer jobs, potentially severe labor shortages, and higher labor costs. This will also ultimately cause businesses to more aggressively raise prices for their products.”