US econ­omy: Con­ti­nu­ity or the Trump un­known

The Myanmar Times - - Busi­ness -

ON taxes, pub­lic spend­ing and pro­tec­tion­ism the two can­di­dates for the White House are di­a­met­ri­cally op­posed: Hil­lary Clin­ton rep­re­sents con­ti­nu­ity while Don­ald Trump fright­ens with his rad­i­cal pro­pos­als.

But while many econ­o­mists are alarmed by the threat Mr Trump poses to Amer­i­can pros­per­ity, there is no short­age of small busi­ness own­ers and in­vestors who be­lieve the Repub­li­can can­di­date’s plans would ben­e­fit the econ­omy.

With polls show­ing the can­di­dates are neck-and-neck be­fore to­day’s elec­tion, the race could be summed up as “Wall Street is pro-Clin­ton, Main Street is pro-Trump”, said Steve Od­land, of the Com­mit­tee for Eco­nomic De­vel­op­ment, a non-par­ti­san, busi­ness-led eco­nomic pol­icy group.

But even Wall Street is some­what am­biva­lent. A sur­vey con­ducted by the CNBC net­work with 50 econ­o­mists and Wall Street par­tic­i­pants showed 82 per­cent think Ms Clin­ton will win, but 46pc feel Mr Trump would be bet­ter for the econ­omy, com­pared to 39pc favour­ing Clin­ton.

An­other sur­vey con­ducted by the Pep­per­dine/Grazia­dio Busi­ness School in Los An­ge­les with 1353 small busi­nesses across the coun­try shows a ma­jor­ity of em­ploy­ers pre­fer Mr Trump due to his po­si­tions on health in­sur­ance (55pc to 45pc for Ms Clin­ton), as well as on taxes (66pc to 34pc) and trade (55pc to 45pc).

Mr Trump’s eco­nomic plan aims to re­vive eco­nomic ac­tiv­ity through dereg­u­la­tion.

He prom­ises to achieve 3.5-4pc growth – com­pared to 1.8pc pro­jected for 2016 – by cut­ting the cor­po­rate tax rate to 15pc from 35pc, and low­er­ing the in­come tax rate for wealthy tax­pay­ers – the high­est bracket would drop to 33pc from 39.6pc. The im­pact would be a sharp in­crease in the bud­get deficit.

Mr Trump also has promised to rene­go­ti­ate US trade agree­ments, re­peal the “Oba­macare” health in­sur­ance pro­gram, and erect a wall on the US-Mex­ico bor­der to pre­vent il­le­gal im­mi­gra­tion.

In con­trast, Ms Clin­ton would mostly stick to Pres­i­dent Barack Obama’s eco­nomic path.

The Demo­cratic can­di­date’s plan in­cludes rais­ing taxes of the rich­est tax­pay­ers, in­creas­ing the fed­eral min­i­mum wage, pro­vid­ing free lo­cal uni­ver­si­ties for the less af­flu­ent, and reforming Oba­macare. Her plan also would widen the deficit but to a lesser ex­tent.

Mr Trump is wor­ry­ing the aca­demic world: No fewer than 370 econ­o­mists, in­clud­ing sev­eral No­bel Prize win­ners, signed an open let­ter in The Wall Street Jour­nal ap­peal­ing to vot­ers to “choose an­other can­di­date”, say­ing Mr Trump spreads dis­in­for­ma­tion and “pro­motes mag­i­cal think­ing and alarm”.

“Don­ald Trump is a dan­ger­ous, de­struc­tive choice for the coun­try. He mis­in­forms the elec­torate, de­grades trust in pub­lic in­sti­tu­tions with con­spir­acy the­o­ries, and pro­motes will­ful delu­sion over en­gage­ment with re­al­ity,” the let­ter said.

Even the In­ter­na­tional Mone­tary Fund is alarmed by the spectre of grow­ing pro­tec­tion­ism, from Mr Trump to Britain’s vote to pull out of the Euro­pean Union, which it says is a threat to global growth.

Mr Od­land said Mr Trump’s style at­tracts some in the busi­ness world be­cause he speaks to vot­ers in the fa­mil­iar blunt pat­ter of a real es­tate de­vel­oper ne­go­ti­at­ing a deal.

“We in the re­tail in­dus­try have to ne­go­ti­ate all the time with com­mer­cial real es­tate de­vel­op­ers. They are bom­bas­tic, they are emo­tional, they come at things in a way that frankly sounds crazy,” Mr Od­land said.

“He’s ap­proach­ing geopol­i­tics in the same way. Is it right? Well it’s un­con­ven­tional. His sup­port­ers say, ‘Well, maybe it will end up to be a bet­ter deal for us,’ and that’s why they are will­ing to make the bet.”

An­a­lysts at Cap­i­tal Eco­nomics said that Mr Trump’s pitch might be ex­ag­ger­ated.

“A Trump vic­tory might not re­sult in the rad­i­cal changes that many fear. He would prob­a­bly soften his rhetoric on trade pol­icy once in the Oval Of­fice and would strug­gle to push his plans for fis­cal pol­icy through Congress and be­yond.”

But in the im­me­di­ate af­ter­math of the elec­tion, a Trump vic­tory, or worse a dis­puted vote, will send Wall Street lower.

An­a­lysts es­ti­mate a Trump win would send the broad S&P 500 in­dex be­low the 2000 level, about 5pc lower than the week be­fore the vote. That is what the in­dex did on June 27, the day mar­kets were shocked by the Brexit vote. But it was not long be­fore the in­dex re­bounded. –

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