Economic policy is an important topic in this election. Mr. Trump and Governor Johnson have fairly different plans on dealing with the federal budget, taxes, trade, and so on. Economics can be a dense subject, which can lead to even relatively informed voters scratching their heads at their candidate of choice’s economic stances. Regardless, the candidates’ plans for dealing with the economy should be analyzed and taken seriously.
Trade is a big part of the U.S.’ economy. According to the Office of the United States Trade Representative (USTR), 13.45% of the country’s GDP in 2013 was from the exporting of U.S. goods and services. Trump and Johnson have vastly different takes on what makes trade effective, and whether international trade is sustainable for the U.S. economy. Trump is against free trade, which is the idea that countries should be able to trade with whom they like with no economic penalties (like tariffs). He believes that tariffs on imports serve to threaten companies to keep their businesses in the U.S. rather than move overseas for cheaper labor, and has said he’d impose tariffs as high as 45% to try and keep jobs in the U.S. Johnson, however, strongly believes that free trade is the best policy when it comes to trade, and thinks that restrictions on trade only serve to hurt consumers and businesses.
Over the past few years, the minimum wage has become a topic of much discussion. Trump has changed his position over the course of his campaign, but as of now, he believes that the minimum wage should be changed to reflect the living standards of each age group, but should only be done by the states. This is in contrast to Johnson who believes the federal minimum wage standard should be removed so that pay is determined solely on the market value of the job, or by whatever the states wish should be the minimum pay.
Trump’s tax plan has been debated heavily over the course of his campaign. His overall goal is to lower taxes for the lower-class and middle-class, and to make the top earners in the U.S. pay “their fair share.” Trump’s plan makes a point to mention that any tax increase or change on the top earners will be limited so that they do not negatively affect jobs for the lower and middle classes. Specifically, Trump’s proposed tax plan for income tax is as follows:
Brackets & Rates for Married-Joint filers:
Less than $75,000: 12%
More than $75,000 but less than $225,000: 25%
More than $225,000: 33%
*Brackets for single filers are ½ of these amounts
The business tax rate will also be lowered to 15% from 35% under Trump’s proposed plan, and the current system for capital gains taxes will be kept the same. Johnson has remarkably different plan. Johnson wants to move away from the income and payroll taxes, and switch to a consumption tax system. This would make your taxes be determined by how much you’re spending, not by how much you’re making. Johnson also wants to eliminate loopholes for special interests and double-taxation for small businesses, most of which would be done through the switch to the consumption tax. This would also mean that the top earners would pay the same tax rate as the lower and middle classes. Johnson has not published a comprehensive tax plan this election cycle.
Trump and Johnson have relatively similar stances on the national debt and the budget. They both agree that the national debt is out of control, and that the budget needs to be fixed to restrain federal spending. Trump thinks cutting public spending will be an ideal way of lowering the debt, but also mentions that a one-time tax of 14.25% of the top earners in the country will help lower the national debt’s balance. Johnson believes that the budget needs to be determined under serious scrutiny, with no stone left unturned. This means entitlements, military spending, and so forth. Johnson believes it is possible to cut costs across the board whilst still ensuring the nation spends appropriately.
The plans proposed by Trump and Johnson have their ups and downs. Many economists believe Trump’s plans to introduce major tariffs to penalize companies trying to import goods into the U.S. creates incentive to simply not do business with the U.S., not to keep their companies in the states. I disagree that free trade is a negative thing for the U.S., especially in an age of globalization. There are other incentives to encourage companies to keep their companies in the U.S., and some jobs we don’t want to do anyway. Outsourcing certain jobs opens up more Americans to be trained in other jobs, typically ones that are higher-earning. Johnson’s goal of free trade across the board poses some concerns, but the general idea is definitely beneficial for the U.S. insofar as our allies are concerned.
The minimum wage is a tad complicated, however. As of now, the federal minimum wage is $7.25/hour, but each state can set its own minimum wage. Tennessee has not increased its minimum wage, but many other states have. This affects the cost of living in each of these states, and can affect the price of goods as a whole across the country. Having a federal mandate on wages may not be a bad thing, but it’s not so clear that the minimum wage itself is the most beneficial thing for workers. According to the Bureau of Labor Statistics’ report on the Characteristics of Minimum Wage Workers in 2014, only 1.3 million Americans aged 16 and older were paid exactly $7.25/hour, and another 1.7 million were paid below the federal minimum (this is explained usually by people making tips, commissions, and overtime pay). This means only 3 million people in the United States are paid the federal minimum wage or less, which is only .9% of the population according to the last census. I’m simply not convinced that there are enough people “living off” the federal minimum wage to warrant raising the minimum wage for everyone. We should do more to offer job training for skilled labor to help these individuals, not raise the minimum wage.
The tax plans of these two candidates are also worth discussing a bit more. Trump’s plan may seem nice for the lower and middle classes, and may even be appealing to the top earners, but economists are worried that his plan would increase the debt immensely, not shorten it. Johnson’s plan for a consumption tax is no angel either. With a consumption tax, the system would mean a fixed rate for all persons regardless of their income. This means that, for instance, if the rate was set at 35%, everyone would pay this rate for consumption, whether they make $15,000 a year or $300,000. The argument against this is that it disproportionately affects lower-income individuals, but I’m not entirely convinced this is a bad thing. If more people felt the reality of what big government spending does to the pocketbook of the nation, the citizens included, they may be more likely to want more fiscally responsible policies. This gives citizens a real incentive to make the government spend money on what is truly important.