After 8 years of an American Democrat administration the recovery from the global financial crisis of 2008 has still not gathered steam. Europe, with its EU chains, is no longer capable of leading a global economic recovery. (I note that the UK or Germany could have played a bigger part in a global recovery if they were each unhampered by EU membership). China and India, together and if their economies were in phase, could also have led a recovery. But the Chinese growth story has stalled and is out of phase with the Indian growth. The US certainly could have, and could still, lead a recovery. But Barack Obama has been too risk averse (read too scared) to take any real leadership role. So while the US is recovering, very slowly, it has not really contributed to being the global economic motor it could be. The primary reason, of course, is that public spending is much too high and, in consequence, taxes are higher than necessary. Obama has elected to print money (quantitative easing) rather than attempting to get the fundamentals right. The EU is still printing money and public spending is little less than profligate. Spain and Portugal are next after Greece and France is not very healthy. They are all pursuing traditional socialist policies of trying to get out of the economic hole by increasing public spending (with newly printed money of reducing value). And with the structure of the EU being what it is, they hold back the countries which have much sounder fundamentals.
The question is, who of Clinton or Trump would contribute more to a global recovery?
Certainly public spending would be higher with Clinton than with Trump. Public infrastructure spending – which is now necessary in the US – would probably be more likely with Clinton. But her choice would be to print money or to increase taxes. Obama took the easy way out and printed money. Whether Clinton would have the nerve to either cut non-infrastructure spending or to raise taxes is uncertain. She may not dither like Obama, but she is not any less risk-averse. Assuming she did increase taxes, she would probably increase corporate rather than personal taxation and that is always a “growth killer”. Small businesses would be hard hit. As Europe has demonstrated so well, minimum wage legislation only destroys – for ever – the entry-level and low-qualification jobs. Clinton will find minimum wage legislation tempting and may fall into the trap of destroying jobs. There seems little chance that a Clinton administration would contribute any more to a global recovery than Obama has.
What Trump might or might not do is uncertain. It is possible that he might address the fundamentals and really reduce the size of the bureaucracy. Or he may increase defence spending and try to balance the books by cutting welfare spending. He could take the measures to help small businesses and it is here, with small businesses, that real growth and wealth creation is generated. Or he may just help the large corporations which creates fewer jobs and favours the wealthiest.
The Clinton path will be “more of the same”. Not much to gain but probably not much worse than with Obama. The Trump path is unknown. It has a much larger upside than anything Clinton has to offer, but it has a much larger downside as well. A Trump path is full of risks. If the economic downsides with a Trump Presidency could be limited and he helped small businesses more than large corporates, then he could contribute to a global revival which Clinton would be incapable of. But the risk is significant.
I remain of the opinion that The US choice is now high risk with Trump or low gain with Clinton.
Tags: Clinton, global economy, Trump
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