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Some Candidates Get the Economics Right

By       Message Seymour Patterson       (Page 1 of 1 pages)     Permalink

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The Debates
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It is not often politicians make comments that make sense for lurking underneath the comments are ulterior motives: currying votes by telling would-be voters what they want to hear. Often they must tailor their public remarks with an eye to satisfying their supporters, whether SuperPacs, party affiliations, or constituents. After all, if you are running for president of the U.S. your goal is to meet the expectations of people who want you in that office in exchange for some services: tax cuts, deregulation, privatization, and defunding of government agencies and departments.

Sometimes, though, even the most rabid political partisan might see it fit to break away from the party's talking points and weave a narrative that might have the effect of causing supporters to flee. This deflection from party thinking might have the desired effect of training the spotlight on the candidate making such a move. These--fleeing support and/or getting more media coverage--are not mutually exclusive outcomes. Most of the Republican presidential candidates in the second Republican debate (September 12, 2015) towed the party line--that did not serve Rick Perry well, however. His absence from the 2nd debate was due to his lackluster performance in the first debate, the fleeing of supporters, and dwindling funds.

The three main Republican candidates have distinguished themselves in several ways: They have not held public office before. And they are true outsiders. Two of them, Donald Trump and Dr. Ben Carson, have dared to buck the party line on some issues. Carly Fiorina's skilled debate performance propelled her to the first tier group. She had chosen to tow the party line in toto, though, including going after Planned Parenthood with some dexterity and determination in the debate--using questionable videos to make a case for totally defunding Planned Parenthood, which uses three percent of its funds for abortion related services and federal moneys can't be used for abortions. Further, when she got the opportunity to respond to Mr. Trump ill-gracious comments about her face, Ms. Fiorina knocked the ball out of the park. Resoundingly it was her night! Running for president should be based on issues that will affect the lives of millions of Americans, not on "a face that launched a thousand ships."

Not long ago, Jeb Bush had to take back his comment that "I'm not sure we need half a billion dollars for women's health issues." Clearly a faux pas: "I misspoke," he declared in his defense. During the debate, Mr. Trump did not let up on Mr. Bush, refusing to apologize to Mr. Bush's wife for having inserted her in his political speech. Mr. Truman has raised ad hominem attacks to an art form to xenophobic and gender specific arguments. Amazingly, the tactic seems to be working no matter who Mr. Truman disparages: he jumped to front runner status in the GOP race to pit a viable candidate against the Democratic standard-bearer, presumably Hillary Clinton. Interestingly, the debate panel participants were reduced to violating President Reagan's Eleventh Commandment: "Thou shalt to speak ill of any fellow Republican." Governor Christie reminded them of this commandment in an impassioned moment during the debate. The venue, ironically, where the sniping was on full display: The Reagan Library.

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Ben Carson separated himself from the rest of the GOP pack by proposing a conversation with both parties--Republicans and Democrats--around the issue of raising the minimum wage. (See Fortune) In his party, advocacy for any increase in the minimum is tantamount to heresy--like admitting to global warming--and should not even be considered as an option in as much as market forces can be trusted to determine wages, not the government in the marketplace. But Dr. Carson dared to go a step farther by proposing that the minimum wage should be indexed to account for inflation. Increases the minimum wage should be automatic, so that they cannot be politicized: in which case we would never have this conversation again. The proposal to raise the federal minimum wage to $10.10 an hour languishes in Congress. However, a number of states have already committed to raising it to $15 an hour. Even some private companies have taken the initiative to increase the minimum wage on their own despite almost universal opposition to it by congressional Republicans. (See The Gazaette) How times have changed! The minimum wage, like maintaining and upgrading the infrastructure, used to be bipartisan goals.

Donald Trump (and Jeb Bush) wants to tax hedge funds (which are like mutual funds for the wealthy: you have to ante up $1 million to get in the game) managers who are getting away with murder. (See Real Clear Politics) In addition, Mr. Trump believes in a progressive tax system such that if you earn more your tax bite would be more. This is a more equitable tax than the flat tax Rand Paul champions of perhaps 14.5 percent or 17 percent. His tax proposal would eliminate taxes on capital gains, dividends and interest (so-called unearned income); for low- and middle-income workers, the Social Security tax would be exempt; estate and gift tax would go the way of the dodo. Disagree with details or not, Rand Paul has an explicit plan. However, this plan will never see the light of day. Senator Rand Paul lacks the flamboyance of Mr. Trump and that's why Ben Carson's second place showing in the polls is an enigma.

Mr. Trump would impose a 35 percent tariff on U.S. car manufacturers in Mexico (and 25 percent on China, viz Chinese goods), who then ship their cars to the lucrative US market. However, such a tariff would not be NAFTA compliant. Mr. Trump's proposal would have a positive resonance because such offshore production activities by US companies do a disservice to American workers: they increase employment in Mexico but they take jobs away from Americans. The carmaker's incentive: its profitability improves and the company's stock valuation rises. Mr. Trump's tariff would accomplish several things: protect U.S. workers in the auto industry, disinsentivize U.S. auto manufacturers going offshore, and provide revenue for the U.S. Treasury. Mr. Trump often affirms that other countries negotiate better than American negotiators and that the U.S. is giving away the store. China has access to the U.S. market, we send our manufacturing jobs to China, and we are indebted to them to the tune of one trillion dollars. This arrangement to Mr. Trump's mind is untenable going forward. I concur with Mr. Trump in this line of reasoning that embodies the best interest of U.S. workers. However, it is not Mr. Trump's economic plan that hurled him to first place--it is braggadocio; his flair; his bizarre hair perhaps; the casinos and hotels that bear his name; and his propensity to go on the attack without a second thought. It is not his economic and political musings, which have not yet been fleshed out.

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Without doubt, there are fundamental economic principles shared by the GOP contestants for the highest office in the land. Some aspects of the canonical GOP platform could be violated only by the outsiders--Donald Trump and Ben Carson--with impunity. The third outsider, Carly Fiorina does not appear interested in straying from principles. All the candidates seeking the GOP nomination would cut taxes, cut spending, repeal the ACA, privatize Social Security; and some of them are willing to put boots on the ground in the Middle East again to deal with the looming threat ISIS represents. None the broadside rhetoric, the snide remarks, the ad hominem attacks, the name-calling, the xenophobia, and saber rattling will not do anything to create more jobs for Americans--some policies if implemented might in fact harm the prospects for the country in the long term.

 

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Seymour Patterson received a Ph.D. in economics from the University of Oklahoma in 1980. He has taught courses and done research in international economics and economic development. He has been the recipient of two Fulbright awards--the first in (more...)
 

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