Takeaways from the debate: Taxes, trade and energy
Despite Fox News host Chris Wallace’s valiant attempts, we didn’t learn much that was new about Hillary Clinton and Donald Trump’s economic platforms at last night’s final presidential debate. But a few things are worthy of note — let’s deal with them one at a time.
Clinton’s ‘open trade and open borders’ remark
The Trump camp has been making a lot of hay out of a piece of one of Clinton’s speeches to private banks, released by Wikileaks, in which she said that she wished for “open trade and open borders.”
Conservative pundits have taken that to mean that Clinton would throw open the doors to anybody who wants to come in, and let trade relations go back to a state of nature, with no rules or restrictions.
At the debate, however, Clinton said that she was talking about energy. “You know, we trade more energy with our neighbors than we trade with the rest of the world combined,” she said, answering Wallace’s question. “And I do want us to have an electric grid, an energy system that crosses borders.”
That’s true, if you’re including all kinds of energy products: Mexico and Canada are by far our largest trade partners. Cross-border flows in electricity has been a little slower to follow the trade in oil and gas, but it’s been happening on a small scale between the U.S. and Mexico since 1905, and is expected to accelerate after Mexico’s energy reforms in 2013. The grid is more integrated on our northern border, with customers able to buy cheap hydropower from Canada.
The U.S. Department of Energy has described the benefits of those connections and endorsed more, which will require new transmission lines across both borders. North American leaders have also committed to ramp up renewable energy development, which will be aided by access to each others’ electricity markets.
It’s not a hemispheric common market yet, but it’s certainly not the sinister world government that Trump and his allies have made it out to be.
The trouble with tax cuts
When asked about their economic plans, Trump responded with his usual confidence that tax cuts would create jobs. “We’re going to cut business taxes massively,” he said. “They’re going to start hiring people.”
But it’s increasingly evident that companies won’t just start hiring people if they suddenly had more cash, because it needs to be clear that enough customers are out there to buy what they’re selling. Economist call this a “lack of demand,” and it’s plagued countries all over the world since the end of Great Recession. When people aren’t making enough to buy new houses and nicer cars, it’s hard to keep the economy running in top gear.
Realizing that problem represents a shift in the field of macroeconomics. Former Federal Reserve chairman Ben Bernanke identified it in 2012. Last week, his successor Janet Yellen gave a speech discussing the emerging consensus that anemic demand has dragged down supply, i.e. the stuff companies and workers produce. Here’s what she said about how increased demand could help:
Increased business sales would almost certainly raise the productive capacity of the economy by encouraging additional capital spending, especially if accompanied by reduced uncertainty about future prospects. In addition, a tight labor market might draw in potential workers who would otherwise sit on the sidelines. Finally, strong demand could potentially yield significant productivity gains by prompting higher levels of research and development spending and increasing the incentives to start new, innovative businesses.
That’s why Clinton has emphasized investments in infrastructure and education and an increase in the minimum wage, arguing that these measures would create more jobs directly and put more cash in the pockets of those most likely to spend it, generating demand from the bottom up rather than the top down. Outstanding question: What trade agreements would pass the candidates’ muster?
Throughout this entire campaign cycle, while there has been much discussion of the ravages of international trade nobody has pressed the candidates on what they would do to make it work for Americans.
Both candidates say they’re not opposed to trade but that trade agreements have put Americans at a disadvantage. Trump has vowed to “negotiate much better deals,” and talked about increasing tariffs on imports. Clinton has said the Trans-Pacific Partnership doesn’t meet her standards for creating American jobs, raising wages, and protecting national security.
That still leaves a whole lot of details completely blank.
For the amount of time we’ve spent discussing this issue, it would have been nice to get a concrete sense of what policies a Clinton or Trump administration would actually pursue.
lydia.depillis@chron.com twitter.com/@lydiadepillis