In a speech last week in New Hampshire, presidential candidate Hillary Clinton outlined an economic vision of “shared prosperity” that centered on raising the incomes of American workers who were allegedly left behind in the prosperous economic era that began in the early 1980s. Remarkably, the majority of her proposals would be detrimental to the financial health of the very Americans she claims to want to help.
Under the headline of helping “working people earn enough to support their families and help them save for the future,” Clinton seeks to expand the earned-income tax credit (EITC). Though the credit was brought into the policy mix by no less of a free-marketeer than the late Milton Friedman, it should be remembered that income subsidies will only serve to expand the supply of lower-skilled workers. While an expanded EITC would add to worker pocketbooks with one hand, it would potentially reduce wages with the other as a rising supply of labor would chase low paying jobs and drive down incomes. And while Clinton seeks to help workers “save for the future,” she makes no mention of allowing them to keep for themselves the taxes they pay into Social Security.
Clinton bemoans “economic policy dynamics [that] are generating rising income inequality.” But she forgets that the wage gap has long been the norm in the United States. As British author Andrew Roberts noted in his latest book, A History of English-Speaking Peoples Since 1900, the fear of falling behind has consistently driven Americans to work harder in order to keep up. Rather than view the wealth gap (a gap that widened during her husband’s presidency) in a pejorative light, she should embrace the process by which the not-yet-rich gamble on new ideas which move them up life’s ladder.
On the subject of outsourcing, Clinton contradicts herself in decrying the movement of jobs overseas. This outsourcing is, among other things, the result of rising wage pressures at home, such that companies seek lower-cost labor elsewhere. Were firms to underutilize the finite supply of stateside labor with low-value work, lower pay would be the result since investors would be unwilling to pay a high price for something that could be done more cheaply elsewhere.
Clinton forgets that without capital, there are no wages, and no jobs.
On the corporate-taxation front, Clinton contradicts her push for higher wages with her desire to make “corporations pay their fair share of taxes.” She forgets that without profit, there is no investment. As it stands now, corporate taxes in the U.S. are among the highest for OECD countries. And if profits are taxed more, there will be a logical capital outflow that will cut into the wages of U.S. workers.
Clinton’s corporate-tax stance also works at cross purposes with her utopian plan to keep jobs in the United States. The high rate of corporate taxation in the U.S. is a certain factor when it comes to corporations selling themselves to foreign companies not impacted by our high tax rates, not to mention U.S. companies relocating their headquarters internationally to shield at least some of their profits from Uncle Sam.
As part of her plan to restore “fiscal responsibility to government,” Clinton would like to return “high-income tax rates to the 1990s levels.” Her desire to raise taxes on the “rich” is easily the most anti-worker plank of her allegedly “progressive vision.” Indeed, after funding life’s basic needs, it is the rich who have the most disposable capital. So if the rich are able to keep more of their money, that additional capital either funds new employment or increased remuneration for existing workers.
In Clinton’s defense, all this is merely her vision, and if she’s elected in 2008 history suggests that she’ll be able to implement very little of it. Still, for a candidate seeking to put workers first, it’s remarkable how little of her vision would help the very workers she champions.