The impact of a Clinton win this election season is being heavily debated. Many market analysts strongly believe that this outcome will result in economic catastrophe for America.
One key problem cited by most anti-Clinton critics who believe that economic stimulation is crucial is her fiscal prudence. These critics base their reasoning on the precedent of Bill Clinton's presidency in the late 1990s. Back then, the government instituted a "brief budget surplus," which was termed an act of "fiscal responsibility," according to a Market Watch article. This had a less than ideal outcome on the economy, which declined nearly immediately afterwards--and the government faced a federal deficit. Put simply, many commentators correlate Clinton's brief surplus with the recession that followed.
According to expert Wynne Godley, one reason why Bill Clinton's fiscal position was unsustainable was because the United States was an account-deficit country at the time. This status rendered the cash flows unsustainable. According to Cullen Roche's article called "Understanding the Modern Monetary System" (as cited in his Market Watch article), for a nation to experience economic growth, at least one sector of the economy must be "expanding its balance sheet"--which usually entails borrowing. Roche viewed the Clinton federal budget surplus as "a spending drag on the aggregate economy." Roche observes that the economy did not regain its stability until after the deficit returned. Only then did "private borrowing stabiliz[e]."
Roche finds parallels between the previous Clinton administration and the current economic environment. Government deficit is now also in decline (due to the recovery of the private sector). And even though there is an upwards trend, the private sector is still weak: household debt growth levels still resemble the levels during recessions. For Roche, current signals are strong suggestions that private markets require expanding its supply of safe financial assets--perhaps by borrowing, and creating a larger deficit.
For Roche, Hillary Clinton's monetary policy is not enough. She hoodwinks voters by selling the story that worrying over government debt is the same thing as worrying about the nation's economic well-being. But this is not the full story--sometimes, government debt can be a good thing. Like Roche, many other commentators have zoned in on Hillary Clinton's belief that "one can spend one's way to prosperity," and they have denounced this belief as preposterous. They also discredit her belief that "raising the federal minimum wage would actually help US employers by giving consumers more money to spend at their businesses." Rather, money spent must have its own source--and this source inevitably turns out to be businesses.
According to Trump, Hillary will raise taxes. But many others say that this is an exaggeration. Under Hillary, taxes will not increase for most Americans--only for a few. Clinton's economic plan aims to increase taxes on businesses and investments--rather than providing tax relief for working, saving, investing Americans. Clinton claims that her plan will lower the size of the economy by roughly 2.6% in 10 years, owing largely to her proposal to expand the estate tax, a tax applicable primarily to the deceased members of wealthy families. She also plans to place a minimum of 30% tax on taxpayers whose incomes exceed $1 million.
Many Clinton critics belonging to this moderate camp argue that increasing taxes will discourage the wealthy from investing, resulting in a drag for the economy at large. Lower investment from the wealthy may cause fewer employers to hire. A final cluster of Clinton critics think that Clinton wants to raise tax rates on capital gains, while not discussing the "job-destroying" capacity this decision might have for lower class Americans. These critics maintain that she wants to tax the rich, by skimming more money off of them, and putting into the government. Furthermore, Clinton's rich tax will be higher than even Obama's. She justifies this by invoking the "fairness" principle, but commentators say that the consequences resulting from this move can only make the economy less fair. Clinton's tax on capital gains will change based on how long a person holds their investment.
Some critics are also quick to remind us that Bill Clinton's economic boom happened only after he "signed a Republican measure to cut capital gains taxes." They believe economic growth can only come from more capital, which brings about "more businesses, better equipment, more jobs, higher incomes, faster economic growth, and ultimately higher standards of living for all--including the poor and middle class." All in all, the debates amongst Hillary's critics can be briefly summarized as follows: raising taxes on anything means having less of that thing to go around. For a tax on capital gains, that suggests "fewer jobs, more income inequality, lower incomes and economic stagnation."
