Investing & Day Trading Education:  Day Trading Academy
Free ebooks Library zlib project z-library zlibrary project

An Economic Choice In The 2016 United States Presidential Election

downloadThe election cycle of 2016 has become one of the most bitter contests in United States history. The personal negatives of both presidential candidates are exceedingly high and voters are having a hard time trusting either of them. If voters are able to separate the politics from actual policy positions, one can then discern between the two visions these potential nominees have for the country.

Both the Democratic Party and the Republican Party have argued that the opposing candidate is unqualified to become president. Democrats argue that based on things that Donald Trump has said and the possibility that he sexually harassed women, totally disqualifies him to hold office. That sentiment does resonate among a segment of the population, that wants a president who will conduct themselves in a polite and restrained manner.

Symbol of the Republican Party

Symbol of the Republican Party

Republicans on their part will acknowledge that Hillary Clinton does have political experience. She has been First Lady, a Senator from New York state and Secretary of State. Their argument resides that she has been either ineffective or has made poor decisions in these roles.

They blame her particularly, for the perceived failures in American foreign policy. The present turmoil in the Middle East they insist, is partially due to her poor judgment.

Republicans will also argue that her determination to put government business on a private e-mail server and the attempts that were made by her and agents under her employ, to destroy some of this correspondence, is behavior that can be construed as criminal.

At the very least, they insist she was reckless and careless with government information, some of which was of a sensitive or classified nature.

downloadThen there is the Clinton Foundation, where Republicans will insist there is clear evidence or at least the appearance of a pay to play scheme. Hundreds of millions of dollars have flowed into this charity and opponents will insist that some individuals were promised and given political influence.

Her opponents insist this is evidence of her corruption.

Democrats will in turn admit that Donald Trump has business experience, but they assert that he followed unethical and immoral practices, to become a wealthy real estate developer.

They use the fact that Mr. Trump will not release his tax returns, as proof that he took advantage of the present tax structure, to not pay what they insist in his fair share.download-59

Now with less than a week to the election, the public is now inundated with another round of the e-mail controversy. The FBI (Federal Bureau of Investigation) has reopened the case against Mrs. Clinton that had supposedly ended last July.

The full reason behind the informing of Congress that the investigation was going to start again is not known. It could be the simple fact, that the FBI Director made the calculus that the information found on the laptop during another investigation, would be somehow released anyway.

This might reflect badly on the FBI and Director Comey, who had determined there was not enough evidence to prosecute Mrs. Clinton in July.

Huma Abedin

Huma Abedin

The laptop in question belongs to the estranged husband of Huma Abedin. She is a chief adviser and Vice-chair for the campaign to elect Mrs. Clinton. Huma has worked for the Clintons for years and is a close confidant.

Critics of Mrs. Clinton have repeatedly pointed out that if she had been more forthcoming on e-mails over the past year, that concerned government business, she would not be in this predicament now. Of course depending what is on them, it might of ended her political career months ago.

The e-mails can be assumed to include personal and foundation business that can be devastating to a politician running for national office. Some of the correspondence might be difficult to separate into such simple categories.

John Podesta Former Counselor to the President

John Podesta
Former Counselor to the President

In addition, there are now daily dumps of hacked e-mails from John Podesta that are being released by Wiki leaks. Mr. Podesta is the Chairman of the Clinton campaign, was Chief of Staff for former President Clinton and Counselor to President Barack Obama.

A number of excerpts from his electronic correspondence, has not shown the Clintons in the best light.

Democrats insist there is political motivation behind the FBI action. The Department of Justice opposed making public the fact, that the investigation was to begin again,so close to an election.

However, Attorney General Lynch has somewhat lost the appearance of impartiality, once she met with former President Clinton on her plane, while Mrs. Clinton was under government investigation last summer.

Loretta Lynch Attorney General of the United States

Loretta Lynch
Attorney General of the United States

Now as a result of the latest information being released about Mrs. Clinton, it could well suppress the vote among her supporters by one or two percent. It is also energizing Trump supporters and having more undecided voters siding with him.

This virtually brings the race to a dead heat, where Clinton had previously been ahead in the polls for months.

What is being lost in all these sensational news items and the focus of the national media on superfluous points, is a look at policy. Voters are being asked to make a major decision that will either maintain the status quo or take the country in a new direction.

Many in the electorate have suggested that the race is less between a Democrat and a Republican and more about a contest, that is being held between a government insider and a total outsider. Mrs. Clinton has been in government service for three decades, whereas Mr. Trump has never held public office.

President Obama addressing Congress regarding healthcare reform, September 9, 2009.

President Obama addressing Congress regarding healthcare reform, September 9, 2009.

One policy concern that has not been covered nearly enough by the candidates, is the issue of the Affordable Health Care Act commonly known as Obamacare. Recent insurance premium hikes on average 22%, is a major issue for millions of Americans.

In Arizona for example, costs are now estimated to increase by 116%. This law passed in 2010, requires all Americans to have a health care plan that must meet government specifications.

In the years before the Health Care Act, medical insurance cost increases averaged 5.4%. In 2014, the first year of Obamacare, insurance rates increased an average of 49% in one year alone. If you include next years rises, the total cost will have gone up over 100% in four years. This is totally unsustainable.

It also makes a mockery of the claim that there has been no real tax increases, during the time Obama has been president.

The President and White House Staff react to the House of Representatives passing the bill on March 21, 2010.

The President and White House Staff react to the House of Representatives passing the bill on March 21, 2010.

There have been increases in co-pays and deductibles have dramatically escalated. Some of the latter have been pushed so high that unless one has a major illness, it is like not having any insurance at all. One would have to spend thousand of dollars, just to have their insurance finally kick in.

Supporters of the Act will argue that many of the increases for most consumers, will be handled with greater government subsidies.

Although this is true for now, a provision in the law specifies that once government support exceeds 0.504% of GDP (Gross Domestic Product), it can only go up according to a formula tied to inflation. That means any additional costs will be absorbed by the consumer.

As insurance companies abandon markets that have proved to be unprofitable, consumer choice has become more limited. In many rural areas, there is only one or two left to choose from. About 20% of those covered, are now limited to just one insurance company.

Some politicians have been very critical of the insurance companies leaving individual states, but these firms were losing hundreds of millions of dollars annually.

President Obama signing the Patient Protection and Affordable Care Act on March 23, 2010

President Obama signing the Patient Protection and Affordable Care Act on March 23, 2010

In addition, as of next year it has been estimated that 57% of all doctors will no longer accept Obamacare for payment. Many of them claim they can no longer afford to do so. The paperwork required and the low payment for services, no longer permit a profit.

Back in 2010, it was estimated that 21 million Americans would be enrolled under these plans by 2016. The latest number is only 12 million. One must assume, that rising cost is partly responsible for this result.

The 2% penalty on income taxes one must now pay if they do not have medical insurance, is still far lower than paying the premiums. That is why younger and healthier Americans have elected to skip coverage for now.

Mrs. Clinton is doubling down on the Obamacare and is therefore willing to spend far more money on the program.

She is also advocating a public health care option. Universal health care insurance has been a goal of hers for decades. Where the money will come from for such an expansion, is not clear.

Trump campaigning in Phoenix, Arizona, in August 2016.

Trump campaigning for president in Phoenix, Arizona, August 2016.

For his part Donald Trump is calling for a repeal of Obamacare and talks about a replacement. There has been no real discussion, what that substitution will be or what it will cost.

Without some backup plan, millions of additional Americans may end up with no health insurance. They will simply join the tens of millions, who presently lack coverage.

The economy remains a major concern for many Americans. The United States has now experienced a full ten years without at least a single year of 3% GDP growth.

This is the first time in the 20th century that this has occurred. The highest for the decade was 2.7% in 2006.

Since the Great Recession began in late 2007 and lasted until June of 2009, it would be expected that growth rates would be low or negative during that two year period.

The economic expansion of an average of just 2.1% since then, is quite troubling. It explains the slow rate in jobs growth and explains why so many Americans have a negative view of the economy overall.

Older man with sign, "Hands Off Our Social Security", Rally in Senate Park, Washington D.C., Feb. 12, 2013.

Older man with sign, “Hands Off Our Social Security”, Rally in Senate Park, Washington D.C., Feb. 12, 2013.

If this trend cannot be reversed, it will matter enormously to Americans of all classes.

Without faster growth many middle class entitlements and poverty programs already financially in trouble, will become totally unaffordable. Social Security, Medicare and government pensions, face major funding shortfalls in the years ahead.

These facts are something the candidates are largely ignoring. Neither side will discuss the coming insolvency of Social Security and Medicare.

In fact Mrs. Clinton is promising a brand new entitlement, with free college education for poor and middle class Americans who attend a public university.

Again, where the money will come from is not explained. Student debt already stands at $1.3 trillion USD (United States Dollar).

What troubles some analysts, is that Clinton and most Democrats do not seem to recognize a simple fact. If the government will fully fund tuition for most students, what incentive will these institutions have in trying to control costs?

Past experience has indicated as government aid increases, there is a corresponding rise in education costs.

This is true for most government sponsored social programs.

What Republicans fail to realize is that higher education costs have now become unaffordable, for an increasing number of Americans. Although it is an individual choice to go to higher priced institutions, even the public facilities are becoming out of reach for a growing proportion of the population.

Map of states with percent change in economic growth in 2013

Map of states with percent change in economic growth in 2013

What would help, would be more available jobs with higher pay. That can only come with faster economic growth. Much of the job growth during the Obama administration although steady, has been in the service industries.

These typically offer lower wages than in manufacturing and high technology.

There has been little presidential attention over the past few years on why growth in the United States has been slowing and why more domestic businesses have been closing than opening.

The costs associated with Obamacare and rising state minimum wage increases have simply exacerbated this situation.

Ideology based on global warming and clean energy, have superseded the quest for growth. Much energy was also expended on the Health Care Act as well. Neither have helped with sustainable growth but do satisfy political constituencies.

Instead layers of new regulations were piled on businesses, already struggling with a burdensome and high corporate tax rate of 38.90%. It is the highest rate in the developed world.

The United States is now ranked 46th globally, in the difficulty in opening a business.

Deficit and debt increases 2001–2012.

Deficit and debt increases 2001–2012.

Another pressing issue which has barely been mentioned is the annual deficits and the escalating national debt. The latter is now at $19.8 trillion USD. This amount is equal to a debt of $167,000 per taxpayer and has grown 240% since 2001.

It will reach $20 trillion before the next president is inaugurated. The interest on the debt exceeds one billion daily, with much of the proceeds going overseas. 

President Obama has virtually doubled the national debt during two terms in office. He has accumulated more debt than all the presidents before him combined. That would be from George Washington to George W. Bush.

Former George W. Bush 43rd U.S. President.

Former George W. Bush
43rd U.S. President.

In 2002, the first full year of the Bush Administration the deficit had increased to $158 billion USD. It peaked in 2004, with costs associated with a buildup in the armed forces to $413 billion.

In 2007, the deficit had dropped to just $161 billion or just 1.1% of GDP.

The Great Recession that began in at the end of 2007 until June of 2009, caused government spending to increase dramatically again. The 2008 shortfall reached $459 billion, the highest of the Bush Administration.

The Obama Administration allowed spending and government debt to explode during his tenure. As a candidate he advised that such spending was irresponsible.

As President, he permitted a vast expansion in government programs and many new initiatives. The deficit for 2009 was $1.4 trillion USD and remained above a trillion through 2012.

Barack Obama 44th U.S. President.

Barack Obama
44th U.S. President.

President Obama now boasts he has cut the deficit by more than half. The 2015 budget shortfall came in at $438 billion USD. No, he simply returned it to near the highest levels it had been under the Bush Administration.

Although growth has stagnated, there has been no recession during most of Obama’s tenure. It has been the slowest recovery since the 1940’s, with growth averaging just 2.1%.

The projected budget deficit for 2016 is $590 billion USD. Government spending is up 4.8% this year while tax revenues are lagging with an increase of only 0.8%.

Public debt will be 77% of GDP by the end of the year. That will be the highest level since 1950, as the costs of World War II and the Cold War were just beginning to wind down.

Fiscal Year 2015 U.S. Federal Spending – Cash or Budget Basis

Fiscal Year 2015 U.S. Federal Spending – Cash or Budget Basis

The total liabilities the United States government faces is far worse. If one factors in future entitlement spending, government retirements, medical costs, government entities, etc. the final bill averages somewhere between $100 and $120 trillion USD that is unfunded.

Yet, the national debt is barely mentioned by candidate Trump. The former talks about rebuilding the military strength of the United States, providing better care for veterans and a major investment in infrastructure.

How this will all be funded is not explained. If the economy grows faster as he has promised, due to a reduction in regulations and tax cuts, some of the added expenditures can be paid through growth, but not all.

Mr. Trump is promising a renaissance in manufacturing. This is how he expects to deliver the many new higher paying jobs. Business deregulation and tax reduction are key elements of this program.

Renegotiating past trade agreements, to make them more favorable to the United States, also factor into the equation. However, these projections must be considered overly optimistic, given the present state of the global economy.

Hillary Clinton Candidate for President of the United States

Hillary Clinton
Candidate for President of the United States

The problem of the national debt, does not appear at all on the expansive Clinton website. She does claim that her new government spending which she disingenuously calls investments, will not add anything to the debt.

Her plan is to raise taxes on the wealthiest Americans and on businesses. How this will grow a stagnate economy heading for recession, makes little sense.

Both of them totally ignore the chronic debt already in existence. Locked in entitlement spending and interest on the debt alone, will keep government outlays moving higher without any new expenditures.

The choice for voters in this presidential election cycle, will be the third in a row where one must decide if more government spending and regulation, will provide a better standard of living.

The electorate might not yet fully understand, that the mounting debt will soon become unsustainable. The damage this excessive indebtedness has done to economic growth, has not been fully explained by either political party.

The cost for means tested entitlements alone, will exceed $11.3 trillion USD in the years ahead.

Contrary to what President Obama has stated, by almost every economic measure the US economy is not better off, since he came to office almost eight years ago. Median income is up less than 1% in eight years and is still lower than it was in 2007. Household income has dropped 2%.

The percentage of the US working age population employed, 1995–2012.

The percentage of the US working age population employed, 1995–2012.

There are now more low wage earners below middle class. Before the Great Recession there were more wage earners above middle class. Home ownership rates are at 51 year lows. This partly explains the anxiety Americans feel towards the economy.

Long term unemployment has become a major drag on the United States economy. A record total of 95 million Americans, are no longer in the workforce. In fact, 14 million Americans have stopped looking for work.

Labor participation at 62.9%, remains near the lowest it has been since 1978. At present,one of five families, do not have a single member that is part of the regular workforce. One of out six American men, are either incarcerated are out of work.

President Lyndon B. Johnson signs the Poverty Bill (also known as the Economic Opportunity Act) while press and supporters of the bill look on, August 20, 1964.

President Lyndon B. Johnson signs the Poverty Bill (also known as the Economic Opportunity Act) while press and supporters of the bill look on, August 20, 1964.

Another troubling sign concerns the poverty rate, which is a major challenge in a representative democracy. Food stamp use has increased 39% over the past eight years. This means there are nearly 13 million more people on food stamps.

Over 43 million people are now living in poverty, which is a 4% increase during the Obama Presidency.

Despite the trillions of dollars spent on social and entitlement programs, the poverty rate has barely budged. In 1965, before the War on Poverty it was 17.3%. In 2014, is had been reduced to 14.8%.

This does little to advance the poverty argument made by the Democratic candidate. That is, if we only spent more money on entitlement and poverty programs, it would make a vast improvement in the living standards of the less prosperous members of society.

So voters can either choose to continue the policies put in place by President Obama, or move in a different direction. The inclination for change is strong among the electorate, but Mr. Trump is not a typical Republican candidate. There is no political record to look at, and it is not clear how committed he is to any conservative policy positions.

Post a Comment

Your email address will not be published. Required fields are marked *