The wisdom on Wall Street is that Hillary Clinton is the safe choice. She’s the certainty candidate to Trump’s uncertainty. So when Jim Comey announced the reopening of the FBI’s Clinton investigation, stocks fell for nine days. And after he pulled back over the weekend, stocks rallied for over 300 points.
Is the market correct in viewing Hillary as the safe and certain choice? I don’t believe so.
By the way, Strategas investment ace Dan Clifton points out that when stocks fall in the months before a presidential election, it usually means the incumbent will lose. And Hillary is the incumbent — Obama 3.0. Investment pundits beware.
But the idea that Clinton is the “safe hands” candidate is plain wrong. If she wins, investigations will swirl around the Clinton Foundation’s pay-for-play shenanigans. In this way, she has become the unsafe hand — the “high-risk candidate,” as Wall Street Journal columnist Holman Jenkins puts it.
Clinton proposes across-the-board tax hikes on corporations, successful earners, health care, capital gains, and financial transactions. She would tax and spend her way to a nationalized, single-payer health system — a sure failure. She would end fossil fuels altogether. And rather than let market forces dictate America’s energy portfolio, she’d return to Solyndra-like energy subsidies.
That is not safe for the economy or stocks.
Essentially, her vision is to withdraw resources from the private free-enterprise economy — robbing business and workers of crucial incentives to perform — and use these resources for another vast expansion of government power. She envisions a larger regulator state, even after the massive Obama regulations clogged the wheels of commerce.
What’s more, she has been a weak candidate. She had trouble putting away Bernie Sanders and is now in the fight of her life against Trump. Translation: Elizabeth Warren and Bernie Sanders are the new ideological architects of a far-left Democratic party that has completely written out of its history the great JFK tax reforms that spurred a massive boom in the 1960s.
Now, Donald Trump is a highly imperfect candidate. We all know that. But, and this is a big but, warts and all, Trump is an outsider who would work hard to drain the Washington, D.C., swamp of corruption, crony capitalism, and corporate welfare. And only an outsider stands a chance of fixing this mess.
What’s more, Trump is the growth candidate. His across-the-board tax-rate reductions for individuals and businesses will boost the economy. His tax cuts for large and small businesses will re-incentivize startups and investment, from which productivity and real wages spring.
We have had a dismal 16 years of below 2 percent growth, virtually no real wage hikes, and stagnant family incomes — or what Reagan called take-home pay. Trump’s economic plan will do for families what Democrats and Republicans have been unable to do in the past decade and a half.
In addition, Trump’s repatriation incentives will bring home trillions of dollars. And his policies for low tax rates and immediate expensing of new investment will keep American businesses at home and win the race for global capital.Tax reform likely will be the first policy action in a Trump administration. A close second will be a thorough repeal and rewrite of Obamacare, restoring a freer market with true consumer choice and competition among providers.
Trump also will roll back the massive Obama regulatory overkill. He will take all the handcuffs off U.S. energy production, push for school choice, protect the southern border, and send criminal illegal immigrants back home for good.
The biggest flaw in the Trump economic plan is the tilt toward protectionism. I have parted company with him on this. The question here is whether his campaign bark will turn out to be bigger than his government-policy bite.
Enforcing trade deals is spot on. Acting in the interest of American workers is correct. But large-scale tariffs are a terrible idea. My hunch is that Trump will promote better trade deals while minimizing tariffs. Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama all used temporarily targeted tariffs on specific industries. Hopefully Trump will go no further than that.
And as Trump has occasionally said, there are great benefits to trade. Let’s hope he holds that thought.
I believe Trump has a prosperity plan. I believe Clinton has a recession plan. And you need an outsider to shake up Washington, D.C.
On Monday I cast an absentee ballot for Donald Trump.
– Larry Kudlow is CNBC’s senior contributor. His new book is JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.