It is imperative to know what’s going on in the economy, especially during an election year. You need to know what the candidates’ economic plans are so you can choose the person who you think will do the best job getting all of us jobs. Here is an important look at how the U.S. economy is performing in regards to the job market, new labor laws and taxes—and how the Presidential candidates promise to fix it all.
The Economy in a Nutshell
Upon graduation, many of us search for high paying jobs straight out of school. A strong economy gives us a better chance to find one and pursue our #CareerGoals. Whether it's through job creation, a flourishing stock market or a raised minimum wage, the economy is the focal point of our futures.
What’s Up with the Job Market?
The Bureau of Labor Statistics hit the nation with a bombshell when it released May's Jobs Report. The report found that U.S. job growth was the slowest it had been since 2010. The U.S. only created about 38,000 jobs in May, compared to the 158,000 job that experts expected to be added.
Safe to say, it left Americans scratching their heads. What happened in the labor market for this unexpected halt to happen? Well, first things first, many economic experts believe that the recent Verizon labor strikes had something to do with it, especially since Verizon is one of the major companies that the BLS looks at for its monthly reports. The strike resulted in about 35,000 workers being counted as "unemployed" in the report. But, even taking this into account, that only puts the U.S. at about 70,000 jobs — close, but not close enough to the expected number of job creations that Americans need to fully get back on their feet from the recession.
Even with the very slow growth in American jobs, the unemployment rate dropped to 4.7 percent. This is the lowest that it's been since the month before the Great Recession began in 2007.
However, the decline could be due to the fact that almost half a million people left the labor force—which means that they either stopped actively searching for work or just decided they didn't need to work anymore (i.e. stay-at-home parent). It's important to remember that the unemployment rate only includes those that are employed and actively searching for work. A federal report only including these numbers doesn't exactly paint a full picture for us. If we include discouraged jobseekers who basically gave up and part-time workers, the unemployment rate increases to 9.7 percent, which isn't that great.
While we are still seeing some effects from the Great Recession, job growth was pretty robust overall in the last year. In the current job market, recent college graduates can be more hopeful to find a job right out of school (or after that post-grad trip to Paris or Thailand you have planned).
Minimum Wage & Overtime Rules
Lawmakers across the nation are starting to address the minimum wage issue. Following the examples set by San Francisco and Seattle, cities, counties and state governments are beginning to approve increases to the minimum wage, up to $15 an hour. Lawmakers, such as in California, often choose to implement the change over the course of a few years so that businesses will have time to adjust to the increase in workers’ pay. The new $15 minimum wage is a 107 percent increase over the federally required minimum wage of $7.25. This is very promising for college graduates, especially since many of us enter the workforce through a lower level job and have to make our way up the "career ladder." With a higher minimum wage, recent grads can work an entry-level job while still making a livable income.
The Obama Administration also recently announced changes to federal overtime rules. Workers are now eligible for "time and a half" overtime pay if they work over the usual 40 hours a week and make under $47,476 annually (increased from $23,660). Now, businesses must pay their employees overtime, or they can try to maneuver around the rule by either increasing their workers’ pay over the income threshold or capping the workweek at 40 hours.
This new rule makes an additional 4.2 million Americans eligible for overtime pay. As you begin your career, you are going to be putting in long hours to get ahead. With the changes to overtime rules, employers will have to pay you exactly what you deserve from your hard work. With more hours, you could even see a boost in your paycheck! More money for other things (like Starbucks).
Taxes
Taxes have definitely played an important role thus far in the election, as they will in your ~real life~. While Democratic candidates are interested in raising taxes to make the wealthy pay more than other Americans, Republicans usually aim to cut taxes for the middle-class and businesses. Depending on which candidate wins, more money could come directly out of your paycheck for tax payments.
Taxes today are actually relatively low compared to the past, especially for the rich. During the 1950s, the top bracket income tax rate (i.e. the income tax on people who made over $200,000/year) was in the 90 percent range for single Americans.
While higher taxes mean that you don’t get to see all of your earned income go into your bank account, tax profits usually get reworked into the federal budget to fund things like the Affordable Care Act (Obamacare) and public education.
So What Are the Candidates’ Economic Plans?
Hillary Clinton
Hillary Clinton’s platform is to raise American incomes and fight inequality. According to Clinton’s websites, her economic plan focuses on strong growth, fair growth and long-term growth.
Minimum Wage
According to Hillary Clinton’s website, she plans on raising the federal minimum wage to $12. However, many have criticized Hillary’s stance on the issue due to past discrepancies over the particulars of her stance. At one point, she said she would approve a $15 minimum as president. She then clarified by saying that $12 would be universal, and that local and state governments should raise the minimum wage even higher in places that have higher living costs (i.e. New York City).
Taxes
Clinton called for a 4 percent tax increase on the top 0.02 percent on taxpayers (those who make $5 million or more per year). Other than that, she plans on keeping the current tax brackets.
Hillary also wants to add the “Buffett Rule” to the existing tax rules. The Buffett Rule, for those who aren’t familiar with Warren Buffett, basically means that any taxpayer making over $1 million every year would have to pay a minimum tax rate of 30 percent. Tax breaks from investments or charitable donations would not be able to dip below that amount.
Besides those two major details, not much else would really change between Obama’s current tax policy and Hillary’s plan.
Wall Street
According to the Washington Post, Hillary Clinton promised she would dissolve larger banks if they happened to pose a risk to the economy. However, “dissolving” or breaking up the banks is sort of an unclear term—many are unsure of what this would mean in practice. It would take a pretty dire situation for a president to be able to impose serious restrictions on banks through Congress.
In addition to banking, Clinton’s tax plan pushes for a Wall Street focus on long term investments rather than immediate profits (which are easily a source of corruption and instability). Currently, investors receive tax breaks on profits reaped from the stock market, even if those profits are immediate and not-longstanding. To counter this, Clinton proposed a tax break on investors only if they hold onto their shares for a certain number of years.
In exact terms, a taxpayer making any more than $415,000 per year would have to hold onto a capital asset for six years before scoring a major tax break. However, some worry that this would discourage wealthy people from heavily investing in the stock market, leading to a net loss for the economy over time.
Other Promises She's Made
She promises to create a New College Compact, where she will invest $350 billion so students don’t have to take out student loans and will decrease interest rates for student loans. She also plans to address women’s workplace issues, such as equal pay and reproductive rights, by passing the Paycheck Fairness Act and stopping attempts to defund Planned Parenthood and protect the Affordable Care Act.
Will It Work?
The Tax Policy Center (a left-leaning financial research center) predicted that Hill’s plan would increase the GDP by 0.5 percent from 2017 to 2026. The report also predicted a $1.1 trillion profit gain over the same time period.
However, the Tax Foundation (which is notably a conservative firm), predicted that the Clinton plan would actually reduce the GDP by 1 percent over the long-term and hurt national revenue.
One important thing to note is that Hillary has said she’d have her husband, former president Bill Clinton, on her economic team. At the end of his presidency, unemployment rates were at a 30-year low. Having him on her team could bode pretty well for the economy, but a one-time success does not guarantee a successful economy the second time around.
According to Kyle Kondik, from the University of Virginia’s Center for Politics, "we can expect a high level of continuity with Obama’s policies" in regards to jobs and wages if she is elected. However, the policies that she has outlined, such as a raising the minimum wage and increasing taxes on the rich, will be difficult to pass with Republican-held majority in Congress.
Senator Bernie Sanders
Bernie Sanders may have endorsed Clinton, but it's still interesting to take a look at how his plans differ from the two major candidates'. Sanders’ platform focuses on income and wealth inequality, especially when it comes to limiting the top percent of taxpayers and corporations from taking more than their fair shares of the nation's wealth.
Minimum Wage
Bernie Sanders takes a hard line on a $15, across the board, minimum wage without qualification. He also sees a clear difference between $12 and $15 as a minimum, unlike presumptive nominee Hillary Clinton. “That’s the difference between the way we do politics. I’m trying to set a high bar,” said Sanders, according to the Huffington Post.
Taxes
Being the candidate with the least fame and notoriety coming into the race, Bernie has made up for it with detailed plans on many, if not all, the major issues. Instead of trying to explain the differences fully, I’ll let Bernie’s campaign chart show the differences. In essence, he wants to create more tax brackets so that the top earners in the U.S. have to pay an upwards of 50 percent of their incomes in taxes in order to fund federal programs like national health care and affordable college tuition.
Senator Sanders’ economic plans would cause all Americans to see an increase in taxes. Reports have also shown that his tax plan could actually increase the U.S. debt by approximately $18-21 trillion. However, his proposals do have economic strengthening benefits to it, such as providing free public education to increase the average workers’ skill levels.
Wall Street
If nothing else, Bernie is famous for his policies on Wall Street—and for good reason. Sanders takes an extremely progressive stance on reforming Wall Street. His campaign site promises to “break up the largest financial institutions in the country,” through a number of new laws. For example, the proposed “Too Big to Fail, Too Big to Exist Act” would restrict large banks from accessing Federal Reserve discounts and insurances on risky activities. However, many of these new acts would need to pass through Congress to actually be enacted, which is a difficult feat.
One big pro to Bernie’s plan is that much of the profits on new taxes on investors and big businesses would be used to fund debt-free public education. No wonder Bernie is winning the majority of young adult voters!
Other Things He Wants To Do
Sanders will invest $1 trillion in infrastructure to put at least 13 million Americans to work, while another $5.5 billion will go to a youth jobs program to provide one million jobs for disadvantaged youth. Sanders is also fighting for the Paycheck Fairness Act (which is currently before Congress) to ensure that women are paid the same as men.
Will It Work?
Bernie Sanders’ platform is to focus on income and wealth inequality. According to a report by the Tax Policy Center, Bernie’s tax plan would raise over $15 trillion in revenue in a ten-year period and boost the GDP by more than 6 percent. He promised to use the revenue toward federal social programs (like national healthcare).
However, many research firms do not think his tax plan can really do it all. The Tax Policy Center and the Urban Institute predicted that Bernie’s programs would cost $33 trillion to actually enact—pushing the country into $18 trillion in debt. Note: the current national deficit is over $19 trillion, so the plan would almost double that number.
Bernie’s campaign asserted that healthcare spending would be a lot more efficient than the research predicted, so the deficit wouldn't actually increase.
Donald Trump
Donald Trump’s proposed tax plan consists of four goals: to provide tax-relief for middle-class Americans, simplify the tax code, grow the American economy and not add to the debt and deficit.
Minimum Wage
Similar to many of Donald Trump’s political views, his stance on the minimum wage is somewhat unclear and has changed several times. He has tweeted "Goofy Elizabeth Warren lied when she says I want to abolish the Federal Minimum Wage. See media—asking for increase!" However, she may not have been lying...at least not entirely.
Goofy Elizabeth Warren lied when she says I want to abolish the Federal Minimum Wage. See media—asking for increase!
— Donald J. Trump (@realDonaldTrump) May 11, 2016
In an interview on May 8, 2016 with NBC’s Meet the Press host Chuck Todd, Trump said, "I'd rather have the states go out and do what they have to do," when it comes to a minimum wage, but that the federal government should not set a floor.
"Having a low minimum wage is not a bad thing for this country," Trump said in a televised interview with MSNBC on August 20. "We can't have a situation where our labor is so much more expensive than other countries' that we can no longer win."
On the same day as his aforementioned Meet the Press interview, Trump also talked to George Stephanopoulos on ABC's This Week. "Well, I am looking at [an increase in the minimum wage] and I haven't decided in terms of numbers. But I think people have to get more."
Trump's stance is essentially saying that somehow people need to earn higher wages, but the federal government should stay out of it entirely. This is a somewhat unenforceable and libertarian standpoint. States could easily swing one way or another; California has instated a $15 minimum wage by 2023, while four states (Arkansas, Georgia, Minnesota and Wyoming) maintain a $7.25 minimum (the lowest wage federally allowed in the country). Having a federal floor keeps states from dropping the wage even lower, a point Trump will need to clarify in the coming months.
Taxes
According to Forbes, Donald Trump’s tax plan offers tax cuts on every single income level. The best savings are unsurprisingly found in the highest income level, dropping the top tax rate from almost 40 percent to 25 percent.
Trump also plans on cutting the amount of tax brackets to just four. The lowest would completely exempt people with an individual income under $25,000 from taxes.
The Trump tax cuts will be fully paid three ways. First, Trump plans to eliminate most loopholes available to the wealthy. Secondly, Trump will allow businesses to bring their corporate monies back to the United States with a one-time 10 percent tax rate and will stop the deferral of taxes on corporate income earned abroad. Thirdly, Trump will eliminate corporate loopholes, which are strategies that companies use to reduce their tax burden. He also promises to stop businesses from going abroad, not by outlawing it, but by cutting the corporate tax rate to 15 percent to encourage businesses to stay here.
However, Forbes warned that more money saved on taxes means a huge cut in federal spending—however, it’s unclear exactly where the budgets would be cut. If spending can’t be cut, the country could add enormously to its trillions of dollars in debt or borrow even more money from China.
Wall Street
As a big businessman himself, Trump plans to reduce taxes on corporations to 15 percent. However, he also promised to limit deductions for large businesses, so that they’d still need to pay at least some taxes.
While the top tax rate on capital gains for Hillary’s plan nears 50 percent, Trump’s is only 25 percent. He also did not mention any plans to force investors to hold onto investments long term.
Will It Work?
Unfortunately for Trump, research centers think his tax cuts and largescale deportation of immigrant workers will seriously hurt the economy. The Tax Policy Center predicts that his tax plan would lead to a 4 percent drop in the GDP and a $9.5 trillion loss of profits over ten years.
Trump proposes that this tax plan will help to increase wages for Americans, but will this actually happen? According to a report by CBS Money Watch, it appears that, while American families would see some tax cuts, the rich would be the ones to see the significant savings.
The Moody Economic Report spells out an even worse situation. Moody’s Analytics predicted a long recession from 2018 to 2020 if Trump is elected. This would lean to a 3 percent fall in the GDP and over a 7 percent unemployment rate. However, Mark Zandi, co-author of the report, advised President Obama and has donated to the Hillary campaign. We can only assume he isn’t the biggest fan of Donald Trump, so the report isn’t exactly unbiased.
The economy determines a country's stability and often global standing. On a more individual level, a good economy can help you find a well-paying job. Many Americans fork over about 30 percent of their incomes to the government, so it's our job to make sure that money is used wisely. The only way for you to make that choice is to get out there and vote!