Seven big things to know about Hillary Clinton’s new plan for the economy
By Max Ehrenfreund July 11
Hillary Clinton, the Democratic presidential candidate and former secretary of state, will deliver a major speech on economic policy on Monday, laying out in more detail her diagnosis of went wrong with the economy and, in broad strokes, how she will approach fixing it, the campaign says. She will make clear, according to a campaign official, that she doesn’t believe wage stagnation and growing inequality are simply facts that we have to live with, caused by trends outside our control. Rather, she will say that the U.S. has the power to change these patterns if we make the right policy choices. Here are seven ways to understand why Clinton is making the case
(1) Clinton’s top goal is raising median incomes According to a campaign official, Clinton will make clear she believes that raising incomes for average Americans is the top priority. To understand why that’s become a big issue for politicians of all stripes, one doesn’t need to look farther than this chart of real median income over the past 40 years. Wages have been going through a prolonged period of stagnation and decline. A related phenomenon to stagnating wages has been growing inequality. The two trends are not the samein the 1990s, the gap between the rich and poor widened even as average workers saw pay rise.
(2) She believes policy can help raise worker pay and reduce inequality The two biggest reasons usually cited for wage stagnation and growing inequality are technology, which makes lowerskill work (like working on a factory floor or clerical duties) less valuable, and globalization, which can boost corporate bottom lines but provide less opportunity for many American workers. No doubt, these are powerful factors. But another way to look at wage stagnation and inequality is through the prism of the financial return to work itself as opposed to the return on investments like stocks and bonds. And it has been declining. So shareholders and top executives, compensated in stock, may be more likely to enjoy the fruits of economic activity than average workers. Leftleaning economists like to point out, however, that this phenomenon largely reflects not just global patterns but also national choices, such as wage and labor standards and tax policies a view Clinton will endorse.
(3) In particular, she is looking to boost women’s pay Clinton is going to talk about how we need to do better to help women and families in the economy. Many women take time away from the workplace to raise their children, or they stop working entirely. As a result, they lose opportunities to develop their skills and professional connections. That could be one reason that while younger men and women earn similar amounts, women in middle age and older earn substantially less.
(4) And Clinton is looking to make sure more women are in the workforce Clinton will call for paid leave policies to help women work while raising families. That might help raising the number of women in the labor force, which has flatlined after years of growth. How much such a policy will to close pay disparities between men and women isn’t as clear. Countries with more generous parental leave polices tend to have even larger pay gaps.
(5) Clinton believes the federal minimum wage should be lifted Clinton will call for raising the federal minimum wage from $7.25 an hour. The chart below shows how the the minimum has changed over time, taking into account increases in prices. It’s important to note that many states have already raised the minimum wage over the past few years, without federal action.
(6) And she believes tax policy changes that favor the wealthy are misguided Clinton is expected to chide Republican presidential candidates for continuing to espouse a GOP philosophy of tax cuts that benefit the wealthy under the theory that that will trickle down to the middle class. Effective tax rates have fallen across all income groups since the 1990s, but especially for the wealthiest Americans. Tax hikes at the end of 2013 and as part of the Affordable Care Act pushed rates back up, though not nearly close to their historic highs.
(7) She also wants to make corporations, particularly on Wall Street, more focused on long-term returns The former New York senator is expected to say that our economy is too often driven by hope of a quick profit rather than more enduring and sustainable growth at benefits more people and she’ll say this is especially a problem on Wall Street. She’ll also underscore the need for more investment in things like infrastructure and research and development. As this chart from Robin Greenwood and David Scharfstein of Harvard Business School shows, Wall Street and other financial components of the economy have dramatically grown as a percentage of total economic output. This partly reflects how the stock market has changed. It was once a place where companies regularly went when they wanted to take on some project in order to get new money from banks and investors. Now, it’s become a place where firms distribute their earnings to their owners, instead of taking money in, as the economist J.W. Mason has shown.
NOT written by Louis Sheehan