Last week this space looked at Clinton’s and Trump’s their respective tax proposals. There, Trump, apart from concerns about his unpredictability, would seem to have greater appeal to the financial community than Clinton. This discussion takes up other major campaign proposals of interest to Wall Street. It shows that this election, as with all the others, offers an uneven mix of hopes, threats, and questions.
Spending and Deficits
On the spending front, Clinton has more to say than Trump. Both promise major programs to improve the country’s infrastructure. He would add billions more for the Pentagon. Clinton, while saying little about the military, promises an additional $10 billion in spending for what she calls, “Make it in America.” This program, she claims, would bring together business, government, organized labor, workers, universities, and community colleges to “harness the country’s strength in manufacturing.” She further promises a major effort during her first 100 days in office to create “good paying jobs.” Separately, she would arrange debt-free college for all. Beyond such general aspirations, neither offers much detail.
To finance such spending, Trump promises to eliminate waste and fraud, while Clinton would make the wealthy pay their “fair share.” The financial community would certainly welcome the boost to business that an improved infrastructure would offer, but it nonetheless remains dubious of the budget effects, not the least because neither candidate offers much in the way of specifics or even a convincing general answer on financing. Generally, financial people are disappointed that neither candidate has proposed anything on entitlements reform, since it is by far the largest, fastest-growing component of the budget.
Here the contrasts between the candidates are truly stark. Trump promises regulatory relief: a pause in new regulations pending a complete review, especially on rules that affect hiring; a requirement that all federal agencies rank their regulations from most critical for health and safety to least; limitations on EPA power; a rescinding of all “job-killing” rules promulgated by President Obama, including Keystone and coal mine closures; and an end to all regulations that prevent oil and gas drilling on the continental shelf. Though the financial community would generally welcome such measures as ways to spur growth and free business to make its own decisions, there is understandable skepticism about how Trump would accomplish these things.
In contrast, Clinton would increase regulation, never popular in financial circles. She would strengthen equal pay rules; implement regulations to lengthen paid leave; make special rules for community banks to increase lending to small businesses; “re-write the rules” to make it more difficult for firms to move jobs overseas; extend regulation to make the United States a “clean energy superpower”; impose a Volcker rule to separate commercial banking from investment banking; in some cases hold executives personally responsible for losses; and impose a special fee on financial firms taking too much risk. All these proposals threaten Wall Street and business with greater compliance burdens as well an increased chance of prosecution. On a more favorable note, Clinton promises to “cut red tape” to make business start ups easier, but here, as with so much else promised by either candidate, the lack of detail blunts any enthusiasm.
Trade and Immigration
On the first of these, both candidates frighten Wall Street, though Trump more than Clinton. Both promise to withdraw from or re-negotiate trade agreements and more aggressively file trade complaints at the World Trade Organization (WTO). Trump has gone further by actually proposing high tariffs on all imports, particularly Chinese and Mexican products. Though many in the financial community worry over the ill effects of Chinese currency manipulation, intellectual property violations, and other questionable trade practices, few would have any enthusiasm for the confrontations and the consequent disruptions seemingly preferred by both candidates, Trump in particular.
Generally, the financial community welcomes immigration. To business and so finance, the flow of labor, skilled or otherwise, outweighs the social problems that might accompany it. Generally financial people prefer reliable, predictable laws to govern such immigration flows. Since neither candidate promises these, the financial community harbors dissatisfaction with each. Trump in particular loses favor on four counts. One is his confrontational approach, which is never good for business. Second is his promise to severely restrict all immigration. Third is the array of enforcement proposals he would implement. These promise disruption as well as increased labor costs, especially e-verification for employment and raising minimum salaries for people on H-1B visas, presumably to make business prefer higher-paid citizens over the foreign born. Fourth is the potential budget impact of his promise to triple the number of ICE officers and build a wall along the Mexico border, which no one believes Mexico would finance. Though there is limited enthusiasm about Clinton’s implicit promise to continue Obama’s chaotic approach, it is less threatening than Trump’s approach.
Health and Human Services
Except where the Affordable Care Act (ACA) is concerned, the two candidates are remarkably similar in this area. Both would offer tax breaks for child-care costs and to help families cope with other essential expenses. Clinton would help particularly with out of pocket health care expenses. Trump would allow families to build health savings accounts and pay for health insurance with monies exempt from taxes, effectively giving individuals a benefit presently reserved for employers. Clinton, to encourage more businesses to provide health care to their employees, would give special tax credit to businesses with staffs of 50 or fewer. This, she stresses, would occur under the ACA.
On the ACA, not surprisingly, they differ. Clinton would expand government supported health care, introducing a public option in the ACA and allowing those as young as 55 to buy into Medicare. She would increase the scope and funding of Medicaid. Trump would repeal the ACA and replace it. Here again, there is a troubling shortage of detail. He would alter the current financing system for Medicaid, using block grants to the states to encourage them to economize and experiment with efficiencies. He would keep down costs generally by increasing competition among drug companies and health-care insurers, primarily by allowing people to buy health insurance across state lines, insisting on greater price transparency from health care providers, and removing barriers that presently keep drug companies from easily expanding their product lines. On balance, the financial community would prefer Trump’s proposals because they would reduce government’s reach and rely more on market solutions than Clinton’s. The lack of detail, however, as well as dubious financing “solutions,” leaves much room for skepticism and wariness.
It is easy to conclude that the financial community would have little enthusiasm for either in the White House. Both have left too much unsaid to give investors the predictability they always crave. Both, by leaving questions about how they would finance their spending schemes as well as by failing even to address the critical question of entitlements reform, have failed to answer the budget questions on which financial people focus. Each threatens the financial community with at least one truly frightening prospect. For Clinton it is tax hikes and aggressive regulation. For Trump it is restraint of trade, especially the tariff wall (much more worrisome than the physical wall he would build along the southern border.)