Based on the First Debate, Neither Clinton Nor Trump Understand Why Americans Are Struggling
At Monday’s presidential debate, neither Hillary Clinton nor Donald Trump gave us much indication that they are prepared to address why so many Americans are still struggling, eight years after the Great Recession. We did get a lot of rhetorical flamethrowing.
Donald Trump blamed foreigners for “stealing” American jobs:
Our jobs are fleeing the country. They’re going to Mexico. They’re going to many other countries. You look at what China is doing to our country in terms of making our product. They’re devaluing their currency, and there’s nobody in our government to fight them. And we have a very good fight. And we have a winning fight. Because they’re using our country as a piggy bank to rebuild China, and many other countries are doing the same thing.
So we’re losing our good jobs, so many of them. When you look at what’s happening in Mexico, a friend of mine who builds plants said it’s the eighth wonder of the world. They’re building some of the biggest plants anywhere in the world, some of the most sophisticated, some of the best plants. With the United States, as he said, not so much.
So Ford is leaving. You see that, their small car division leaving. Thousands of jobs leaving Michigan, leaving Ohio. They’re all leaving. And we can’t allow it to happen anymore. As far as child care is concerned and so many other things, I think Hillary and I agree on that. We probably disagree a little bit as to numbers and amounts and what we’re going to do, but perhaps we’ll be talking about that later.
But we have to stop our jobs from being stolen from us. We have to stop our companies from leaving the United States and, with it, firing all of their people. All you have to do is take a look at Carrier air conditioning in Indianapolis. They left — fired 1,400 people. They’re going to Mexico. So many hundreds and hundreds of companies are doing this.
We cannot let it happen. Under my plan, I’ll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses. That’s going to be a job creator like we haven’t seen since Ronald Reagan. It’s going to be a beautiful thing to watch.
Companies will come. They will build. They will expand. New companies will start. And I look very, very much forward to doing it. We have to renegotiate our trade deals, and we have to stop these countries from stealing our companies and our jobs.
Trump isn’t wrong when he argues that our irrational tax code drives jobs overseas. But when it comes to free trade and manufacturing, the picture is much more complex. Trump downplays the importance of federal regulations and labor laws in driving up the cost of manufacturing in the United States. The response to those regulations has been in part to move jobs overseas. But an even more important response has been to invest in automation. Robots are immune from minimum wage laws, and they can’t pay labor union dues.
Put another way: the jobs that have left won’t come back if we were somehow to repeal NAFTA and other free trade agreements. What would come back after a trade war is higher prices for basic consumer goods, making it even harder for low-income Americans to make ends meet.
Hillary Clinton doesn’t even seem to understand what caused the Great Recession. “Let’s stop for a second,” she said on Monday, “and remember where we were eight years ago. We had the worst financial crisis, the Great Recession, the worst since the 1930s. That was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off of Wall Street, and created a perfect storm.”
As I write in Forbes today, that’s wrong on every count.
The financial crisis of 2008 [was] an event whose proximate cause was the collapse of a housing bubble driven by the Federal Reserve’s low interest rates; reckless lending policies pushed by Congress, Fannie Mae, and Freddie Mac; and the resultant boom in cash-out mortgage refinancings.
It’s not just that the Bush tax cuts had nothing to do with the financial crisis. They actually did the opposite of what Hillary claims they did: the wealthy actually contributed more in taxes after the “cuts” went into effect. In 2003, the top 0.1 percent paid $117 billion in taxes. In 2007, they paid $225 billion. In 2003, the top 1 percent paid $256 billion in taxes; in 2007, $451 billion.
Not only did the absolute dollar amount of taxes paid increase, but so did the share of total federal taxes. In 2003, the top 0.1 percent paid 6.6 percent of total federal taxes; that share increased to 8.8 percent in 2007. For the top 1 percent, the share went from 14.4 percent to 17.6 percent. By contrast, the share paid by the bottom 75 percent declined.
Mrs. Clinton spent a good chunk of her policy time arguing for debt relief for the college-educated: an important policy problem, to be sure, but one that disproportionately affects higher-income Americans. What Clinton has never proposed is a way to reduce the underlying cost of a college education, so that more people can afford to go to college without taking out hundreds of thousands of dollars in student loans.
More importantly, her overall approach to the economy is wrong on almost every front: more regulations that will hamper economic growth; a newfound opposition to free trade; higher taxes; and more.
Thanks in large part to Janet Yellen and the Federal Reserve, President Obama’s tenure has been great for the very wealthy; far less so for the poor. It remains to be seen if the next president can do any better.