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Trump or Hillary; Who Would Be Better on the Middle Class?

The Middle Class

Aristotle said in The Politics, “The best political community is formed by citizens of the middle class, and that those states are likely to be well-administered in which the middle class is large, and stronger if possible, than both the other classes, or at any rate than either singly.”

The middle class, the plumbers, the electricians, the professionals, factory workers, teachers, and police officers among others, have always been the backbone of America.  A disappearing middle class means that people are falling into the lower class or rising into the upper class.  If the number of those in poverty rises into the majority, society becomes unstable and faces the prospect of revolution, possibly violent.  If too many rise to the level of the elite upper class the economy becomes unsustainable.

When the middle class shrinks and is bled equally by the upper and lower class a hateful society arises in its place.  Aristotle put it this way: “Thus arises a city, not of freemen, but of masters and slaves, the one despising, the other envying; and nothing can be more fatal to friendship and good fellowship in states than this:  for good fellowship springs from friendship; when men are at enmity with one another, they would not even share the same path.

In 2009, President Barrack Obama, believing the middle class is the economic engine of the nation, signed a Presidential Memorandum creating a task force to assist the middle class and put Vice President Joe Biden in charge.  Biden said, “It is our charge to get the middle class – the backbone of this country – up and running again.”

However, they have failed to achieve the objectives set out and the middle class continues to shrink.  For the first time in the nation’s long history the middle class no longer represents the majority of family households.  A major byproduct of the reduction in the middle class is an increase in income inequality.  In 2014 the median income for all households in the United States, according to the U.S. Census Bureau, was $53,657.   The middle class is defined as 68% of that number as the minimum and 200% of that number as the maximum.  So as some households drop below the $36,487 minimum and some rise above the $107,314 maximum the income inequality in the country becomes more pronounced.

Bernie Sanders skyrocketed to “rock star status” in this election cycle among young millennials riding a theme of economic justice which entailed a reduction in income inequality and an increase in individual opportunity.  He railed against the top 1% who control the majority of the income and wealth in the United States.  He proposed socialism and a complete redistribution of wealth as the answer.  What many of these young and passionate millennials, who are just now becoming involved in the political process, fail to understand is that this economic unfairness is the result of a shrinking middle class and not the fault of capitalism.

The question:  Who has the understanding and fiscal policy to bring back the middle class?

The Clinton Plan

The first step in solving any problem is to be able to name it and have a clear understanding of it.  Secretary Clinton hasn’t held a real job in a long time.  She hasn’t driven herself in a car in the last twenty years.  Her daughter, Chelsea, was given a job with NBC paying $600,000 per year.  When she left public service as Secretary of State she gave paid speeches and has made over $21 million dollars over a three year period.  While this doesn’t necessarily mean she is out of touch with the middle class, the following clip from her speech in Charlotte, NC with President Obama on July 5 is telling.

https://www.youtube.com/watch?v=T1wVJkR61IM

It is entirely possible that Secretary Clinton does not understand exactly what the middle class is.  Minimum wage workers are not the economic engine of this nation’s economy and minimum wage jobs were never meant to represent a living wage.  These jobs washing dishes and working the drive-thru were mainly after-school student positions where young people learned the valuable lesson of work ethic.  These are mainly positions in the hospitality industry which provide necessary and valuable services but aren’t meant to be career positions.

Even raising the minimum wage to $15/hour will only put a full-time worker to just over $31,000 per year.  This does not even break the minimum threshold of the middle class.  So this certainly doesn’t represent a raise for the middle class.

The next aspect of the Clinton Economic plan is to boost economic growth by giving the middle class and small businesses a tax cut, establishing an infrastructure bank, and funding more scientific research.  She would make companies pay for family leave and add the following programs paid for by the taxpayers: College Affordability Plan ($35 billion), National Infrastructure Plan ($27.5 billion), Expanded Childcare Plan ($27.5 billion), Expanded Funding for IDEA ($16.6 billion), and an Energy Plan ($9 billion).

She will pay for these by an increase on short term capital gains taxes and personal income tax on those making $1 million or more per year.

So her plan is to keep NAFTA in place and sign TPP and use taxpayer money to fund a massive infrastructure program to hire workers to build new roads, bridges and water systems.  While these are middle class jobs, they are not jobs that produce either goods or services which means we will continue to have massive trade deficits and a low GDP, which is a measure of the amount of goods and services produced by the economy.  This is also a finite solution to the problem of the middle class as these taxpayer funded efforts are all temporary.  Once the roads and bridges are built in an area the only way to keep the economy running is to create other busy-jobs to keep people employed.

In summary, the Clinton plan involves more taxes to pay for more government programs and higher spending.

Clinton Policy Grade: D-

 

The Trump Plan

While a case can be made that Donald Trump is far wealthier than Secretary Clinton and, based on this, may not be in touch with the middle class either, there are stark differences between Mr. Trump and Secretary Clinton.  While he is elite in terms of wealth and income, it has derived from creating jobs and working with foremen on construction sites, painters, roofers, and heavy equipment operators.  He sets the incomes and signs the checks.  What is Donald Trumps solution for growing the middle class? As Joe Biden would say, a three-letter word: J O B S.

Sometimes the simplest solutions to problems are the best.  How does Donald Trump plan to create these jobs?

During the Republican primary Mr. Trump would travel around the country and point out at his rallies how many of the nation’s manufacturing jobs in that area have been lost in the past couple decades since NAFTA.  In many dilapidated areas of small-town America these numbers are as high as 50%.  Abandoned factories, boarded up businesses are the norm throughout these areas where, often, the towns rose up around the factories which were the lifeblood of the local community. These factory jobs are middle class jobs that create products.  Unlike the infrastructure jobs that Hillary has put forward, these jobs actually create goods which increase the GDP and reduce trade deficits.

The Trump economic plan for expanding the middle class is a four part plan.

The first part starts with the trade deals, NAFTA and TPP.  He has stated that he will renegotiate NAFTA using the provisions in the document and throw out TPP until it makes sense for the American worker.  This alone, if nothing else were done, will stop what Ross Perot described as “the giant sucking sound” of NAFTA drawing millions of jobs from the American heartland.

The second part is lowering the corporate tax rate from 35%.  A low tax rate not only keeps companies from moving out of the United States but it invites foreign corporations to come to America.  This is opposite of the Clinton plan which seeks to raise corporate tax rates to pay for increased government.  The basic concept is that 15% of a lot is better than 50% of nothing while, at the same time, we produce GDP increasing jobs.  The wages from these jobs are cycled back into the local restaurants, grocery stores and economies instead of being paid out to local economies in Mexico, China or Japan.

The third part is reducing the regulations which strangle small business.  Specifically, these are the businesses who are unable to hire an army of accountants and lawyers to fulfill these regulations and who do not have the option of picking up and relocating to Sweden.

The fourth part is the idea of using targeted tariffs to level the playing field between the United States and countries where companies can get away with paying low, non-living wages.  If company profits are offset by tariffs, there is more incentive for companies like Carrier or Ford to stay and build new factories in the United States.  While many say the idea of targeted tariffs will create economic hostility and trade wars between countries, that has been proven to be a myth by two highly successful targeted tariffs.

In 1963, Lyndon Johnson imposed a tax known as the Chicken Tax which was a 25% tariff on potato starch, dextrin, brandy and light-duty trucks.  This was in response to tariffs placed on US chicken by France and West Germany.  Eventually, the tax was lifted on all the imports except the trucks.  This tax was left in place to protect domestic automakers from foreign competition.  Even today, this targeted tariff continues to benefit America as the Toyota Tundra is built in Texas and the new Honda Ridgeline is built in Alabama. It is only recently, when the UAW negotiated a raise for its workers from $47/hour to $56/hour, that Ford has decided to triple its production in Mexico where wages are 80% less than in the United States.

In the early 1980’s America was in danger of losing an icon of American manufacturing as Harley Davidson of Milwaukee was in danger of going under.  In 1983, Ronald Reagan, instead of asking taxpayers to foot the bill with a bailout to Harley Davidson, ordered a tenfold increase in  tariffs on all imported motorcycles of 700cc or higher.  This targeted tariff scaled back over a five year period and gave Harley the advantage it needed to rebound.  Today, Harley is as strong as it has ever been and now is joined by Victory and Indian in an expanding American motorcycle market.

In summary, the Trump plan is to renegotiate unfavorable trade deals and impose incentives for companies creating jobs in America and penalties for leaving.

Trump Policy Grade:  A

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